Extreme heat is slamming the world’s three biggest economies all at once

London (CNN Business) estimates how disaster climate change will be for a global economy historically proven to be challenging. But this summer, the clearer how fast it can pile up.

Extreme heat and drought conditions hit the United States, Europe and China, the problem of compounding for workers and businesses when economic growth has slowed sharply and adds pressure on prices.
In Sichuan China Province, all factories have been ordered to be closed for six days to save power. Ships carrying coal and chemicals struggled to travel along the German rhine river. And people who live on the western coast of America have been asked to use less electricity because the temperature soared.
These events “have the capacity to be significant enough for certain affected areas,” said Ben May, Director of Macro Global Research at Oxford Economics.
The level of pain can depend on how long the heat waves and lack of rain. But in countries like Germany, experts warn that there is no slightly visible relief, and the company is preparing the worst.

Extreme weather and economic slowdown

This is not just Rhine. Throughout the world, rivers that support global growth – Yangtze, Danube and Colorado – dry up, inhibit the movement of goods, disrupt the irrigation system and make it difficult for power and factories to remain cold.

At the same time, the heat that is inhibiting the transportation network, tension of the power supply and hurts the productivity of workers.

We should not be surprised by the wave heat event, “said Bob Ward, Director of Policy and Communication at the London Economics’ Grantham Research Institute on Climate Change and the Environment.” They are exactly as we predict and become part of the trend: more often, more intense, throughout the world. ”
China faces its most fierce heat waves in six decades, with a temperature crossing 40 degrees Celsius (104 degrees Fahrenheit) in dozens of cities. The California section can see the temperature as high as 109 degrees Fahrenheit this week. Early this summer, the temperature reached 40 degrees Celsius in England for the first time.

The global economy is under pressure. Europe is at high risk of recession because the price of energy soared, triggered by the Russian invasion of Ukraine. High inflation and aggressive interest rate increases by Federal Reserve endangering growth in the United States. China wrestles with the consequences of the loud Coronavirus locks and the real estate crisis.
“At present, we are at the most difficult point of economic stabilization,” said Chinese Prime Minister Li Keqiang this week.
Something else to worry about
Extreme weather can worsen the “existing pinch points” along the supply chain, the main reason for inflation is difficult to reduce, said Oxford Economics May.
China Sichuan Province, where factories have closed production this week, is the center for semiconductor makers and solar panels. The allotment of strength will hit the factory owned by several largest electronics companies in the world, including suppliers of Apple (AAPL) Foxconn and Intel (INTC).
The province is also a center for the Chinese Lithium Mining Industry. Shutdown can encourage raw material costs, which are key components in electric car batteries.
The neighboring city of Chongqing, which is at the Yangtze and Jialing river meeting, has also ordered factories to suspend operations for a week until next Wednesday to preserve electricity, government media report.

Chinese economic forecast this year has been ranked as a consequence. Analysts in Nomura cut their 2022 projections for GDP growth to 2.8% on Thursday – far below the target of 5.5% of the government – while Goldman Sachs cut their estimates to 3%.
Rhine, which shrinks Germany, meanwhile, has dropped below the critical level, inhibiting the flow of ships. This river is an important channel for chemicals and seeds and commodities – including coal, which are in demand because the country is competing to fill storage facilities with natural gas ahead of winter. Finding an alternative transit form is difficult to remember lack of labor.
“Only a matter of time before plants in the chemical or steel industry are closed, mineral oil and building materials fail to achieve their goals, or large volumes and severe transportation can no longer be carried out,” Holger Lösch, Deputy Director of the German Industry Federation, said in a statement this week .
Low water levels along Rhine shaved about 0.3 points of the percentage of German economic output in 2018, according to Carsten Brzeski, Head of Global Macro in Ing. But in that case, low water is not a problem until the end of September. This time, it can reduce GDP with at least 0.5 points of percentage in the second half of this year, he estimates.
Economic sentiment in Germany continues to fall in August, according to data released this week. Brzeski said the country “would need economic wonders” to avoid falling into a recession in the coming months.

In West America, the extraordinary drought dries the largest reservoir in the country, forcing the federal government to implement new compulsory water cutting. It also forced farmers to destroy plants.
Nearly three quarters of US farmers said that this year’s drought hurt their harvest – with significant crops and loss of income, according to a survey by the American Farm Bureau Federation, an insurance company and lobbying group representing agricultural interests.
This survey was conducted in 15 states from June 8 to July 20 in the extreme drought area from Texas to North Dakota to California, which is almost half of the country’s agricultural production value. In California – Countries with fruit and high bean tree plants – 50% of farmers say they must move trees and multi -year plants due to drought, which will affect future income.
Without significant investment in increasing infrastructure, costs will only continue to increase, Ward from the London School of Economics records. And the impact may not be gradual.
“There are signs of this heat episode not only to be a little more intense and often from time to time. This happens in a kind of non-graduate way, and that will make it more difficult to adapt,” Ward said.