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Macro Regime — 2010-W36

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↩ Home Macro index ← 2010-09 board

⚠ 0 very-stale + 2 stale series across the four blocs — flagged inline.

Standing macro backdropBORROWED

Borrowed from its month (2010-09); the weekly reads the standing object, it does not recompute the aggregate.

United States: goldilocks / reflation
China: overheating / late-cycle
Euro area: expansion, at target
Japan: deflation watch

month aggregated actuals

United States

Indicator	Basis	2010-09	2010-08	Change
Core CPI	% MoM	0.09 2010-09-01	0.07 2010-08-01	→ 0.02
Core PCE	% YoY	1.3 2010-09-01	1.42 2010-08-01	▼ -0.12
CPI (YoY)	% YoY	1.12 2010-09-01	1.15 2010-08-01	→ -0.03
FX vs USD	px	not recorded
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	56.3 2010-09-01	55.5 2010-08-02	▲ 0.8
PMI (svc)	index	51.5 2010-09-03	54.3 2010-08-04	▼ -2.8
Policy rate	%	0.25 2010-09-30	0.25 2010-08-31	→ 0
2s10s slope	pp	2.11 2010-09-30	2 2010-08-31	▲ 0.11
Unemployment	%	9.5 2010-09-01	9.5 2010-08-01	→ 0
10Y yield	%	2.53 2010-09-30	2.47 2010-08-31	▲ 0.06
2Y yield	%	0.42 2010-09-30	0.47 2010-08-31	→ -0.05

China

Indicator	Basis	2010-09	2010-08	Change
CPI (YoY)	% YoY	3.5 2010-09-01	3.3 2010-08-01	▲ 0.2
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)	index	53.8 2010-09-01	51.7 2010-08-01	▲ 2.1
PMI (svc)	index	58 2010-09-01	57.1 2010-08-01	▲ 0.9
Policy rate	% (1Y LPR)	not recorded
2s10s slope	pp	1.14 2010-09-30	1.06 2010-08-31	▲ 0.08
Unemployment	%	not recorded
10Y yield	%	3.32 2010-09-30	3.23 2010-08-31	▲ 0.09
2Y yield	%	2.17 2010-09-30	2.17 2010-08-31	→ 0.01

Euro area

Indicator	Basis	2010-09	2010-08	Change
CPI (YoY)	% YoY	1.8 2010-09-30	1.6 2010-08-31	▲ 0.2
FX vs USD	px	not recorded
GDP	% YoY	0.2 2010-09-01	-0.3 2010-08-01	▲ 0.5
PMI (mfg)	index	53.6 2010-09-23	55 2010-08-23	▼ -1.4
PMI (svc)	index	53.6 2010-09-23	55.6 2010-08-23	▼ -2
Policy rate	%	1 2010-09-02	1 2010-08-05	→ 0
Unemployment	%	not recorded
10Y yield	%	3.49 2010-09-01	3.44 2010-08-01	▲ 0.05

Japan

Indicator	Basis	2010-09	2010-08	Change
Core CPI	% YoY	-1.5 2010-09-25	-1.5 2010-08-25	→ 0
CPI (YoY)	% YoY	-0.9 2010-09-25	-0.9 2010-08-25	→ 0
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	0.1 2010-09-07	0.1 2010-08-30	→ 0
Unemployment	%	5.1 2010-09-29	5 2010-08-29	→ 0.1
10Y yield	%	0.9 2010-09-01	1.02 2010-08-01	▼ -0.12

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

goldilocks / reflation

expansion · below target · on hold

Improving growth with inflation at/below target — the benign mix. Cyclicals, small-caps and risk assets broadly tend to lead; long bonds lag as growth firms.

● 1 active

China

overheating / late-cycle

expansion · above target · on hold

Above-trend growth with above-target inflation. Late-cycle: cyclicals and inflation beneficiaries can still run, but the central bank is biased to tighten, so duration and high-multiple growth are exposed.

● 1 active

Euro area ⚠ stale

expansion, at target

expansion · at target · on hold

Solid growth with inflation near target. Constructive for risk assets broadly; the watch-item is whether inflation starts to push above target and shifts policy.

○ no change

Japan ⚠ stale

deflation watch

unknown · deflation risk · on hold

Activity is soft and inflation is at/below zero — the risk is entrenched deflation. Favors duration (long bonds) and quality; cyclicals struggle until policy eases decisively. The catalyst to watch is stimulus / a policy cut.

○ no change

Mechanisms & channelsL2

United States

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 55.5 → 56.3 (+0.8)

Manufacturing PMIPMI — Purchasing Managers' Index. Above 50 = the sector is expanding vs last month; below 50 = contracting. A timely read on activity. is above 50 and rising.
Why: A reading above 50 means more firms report expanding activity than contracting; rising means the breadth of expansion is widening — a timely, forward-looking growth signal.
Earnings expectations broaden toward economically-sensitive sectors.
Why: Stronger activity feeds revenue and pricing power first in the parts of the market geared to the physical economy.
Cyclicalscyclicals — Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary., small-caps, EM and commodities lead; defensivesdefensives — Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows. lag.
Why: Capital rotates toward the cycle — industrials, materials, energy, smaller and more leveraged firms, and the commodities their activity consumes — while steady-demand defensives become relatively less attractive.

Helps
cyclicals (industrials, materials, energy)small-capsEM equitycommodities

Hurts
defensive sectors (staples, utilities)long government bonds

Caveat: If acceleration also stokes inflation fears, the bond-yield response can offset the equity benefit (good growth becomes 'too good'), especially late-cycle.

House-view hook — empty (textbook default; Stephen's view bakes in here).

What would change the read

Inflation surprise (upside) Core inflation is steady, so the upside-surprise channel is quiet. It would fire on a core reading ≥0.2pp above the prior — watch it because that is what forces a central bank to stay restrictive and pressures the longest-duration assets first.
Inflation surprise (downside / disinflation) Core inflation isn't cooling fast enough to trigger the disinflation channel. A fall of ≥0.2pp would fire it — worth watching because it is the cleanest tailwind for long-duration growth and government bonds.
Monetary easing (rate cut) The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.

China

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 51.7 → 53.8 (+2.1)

Manufacturing PMI is above 50 and rising.
Why: A reading above 50 means more firms report expanding activity than contracting; rising means the breadth of expansion is widening — a timely, forward-looking growth signal.
Earnings expectations broaden toward economically-sensitive sectors.
Why: Stronger activity feeds revenue and pricing power first in the parts of the market geared to the physical economy.
Cyclicals, small-caps, EM and commodities lead; defensives lag.
Why: Capital rotates toward the cycle — industrials, materials, energy, smaller and more leveraged firms, and the commodities their activity consumes — while steady-demand defensives become relatively less attractive.

Helps
cyclicals (industrials, materials, energy)small-capsEM equitycommodities

Hurts
defensive sectors (staples, utilities)long government bonds

Caveat: If acceleration also stokes inflation fears, the bond-yield response can offset the equity benefit (good growth becomes 'too good'), especially late-cycle.

House-view hook — empty (textbook default; Stephen's view bakes in here).

What would change the read

Growth slowdown (deepening contraction) Manufacturing is not both below 50 and falling, so the deepening-contraction channel is dormant. It fires when a sub-50 PMI turns lower — that is the trigger for the defensive rotation and a bid for duration (a sub-50 PMI that is *rising* is the trough channel, M13, not this one).
Long-end yield spike / term-premium rise The 10-year yield isn't spiking, so this channel is dormant. A jump of ≥0.1pp would fire it — watch it because it compresses the highest-multiple growth names and long bonds fastest.
Yield-curve inversion (2s10s < 0) The 2s10s curve is positive (not inverted), so this warning channel is dormant. It fires if 2s10s turns negative — watch it because inversion is a classic late-cycle recession warning, though with long and variable lead times.

Euro area

No active mechanism this week — the standing read above carries the bloc.

What would change the read

Monetary easing (rate cut) The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.
Monetary tightening (rate hike) The policy rate is steady, so the tightening channel is dormant. A hike would fire it — watch it because it hits long-duration growth, long bonds, and gold first.
Growth acceleration (expansionary PMI) Manufacturing isn't both expanding and accelerating, so the growth-acceleration channel is dormant. A rising PMI back above 50 would fire it — it matters because it's the signal to rotate from defensives toward cyclicals.

Japan

No active mechanism this week — the standing read above carries the bloc.

What would change the read

Inflation surprise (upside) Core inflation is steady, so the upside-surprise channel is quiet. It would fire on a core reading ≥0.2pp above the prior — watch it because that is what forces a central bank to stay restrictive and pressures the longest-duration assets first.
Inflation surprise (downside / disinflation) Core inflation isn't cooling fast enough to trigger the disinflation channel. A fall of ≥0.2pp would fire it — worth watching because it is the cleanest tailwind for long-duration growth and government bonds.
Monetary easing (rate cut) The policy rate is on hold, so the easing channel is dormant. A cut would fire it — it matters because the first cut of a cycle typically broadens a rally and pressures the currency.

The dataL3

United States

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.12	1.20	-0.08 ▬	2010-09-01
Core CPI	0.09	0.10	-0.01 ▬	2010-09-01
Core PCE	1.30	1.42	-0.12 ▼	2010-09-01
Policy rate	0.25	0.25	+0.00 ▬	2010-09-12
GDP	1.60	2.40	-0.80 ▼	2010-08-27
PMI (mfg)	56.30	55.50	+0.80 ▲	2010-09-01
PMI (svc)	51.50	54.30	-2.80 ▼	2010-09-03
Unemployment	9.60	9.50	+0.10 ▬	2010-09-03
10Y yield	2.81	2.77	+0.04 ▬	2010-09-10
2Y yield	0.58	0.57	+0.01 ▬	2010-09-10
2s10s slope	2.23	2.20	+0.03 ▬	2010-09-10
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	3.50	3.30	+0.20 ▲	2010-09-01
Policy rate	n/a
GDP	n/a
PMI (mfg)	53.80	51.70	+2.10 ▲	2010-09-01
PMI (svc)	58.00	57.10	+0.90 ▲	2010-09-01
Unemployment	n/a
10Y yield	3.30	3.27	+0.03 ▬	2010-09-10
2Y yield	2.16	2.16	-0.00 ▬	2010-09-10
2s10s slope	1.14	1.10	+0.03 ▬	2010-09-10
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.60	1.70	-0.10 ▬	2010-08-31
Policy rate	1.00	1.00	+0.00 ▬	2010-09-02
GDP	0.20	-0.30	+0.50 ▲	2010-09-01
PMI (mfg)	55.10	55.00	+0.10 ▬	2010-09-01
PMI (svc)	55.90	55.60	+0.30 ▬	2010-09-03
Unemployment	10.00	10.00	+0.00 ▬	2010-08-31
10Y yield	3.49	3.44	+0.05 ▲	2010-09-01 ⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	-0.90	-0.70	-0.20 ▼	2010-08-25
Core CPI	-1.50	-1.50	+0.00 ▬	2010-08-25
Policy rate	0.10	0.10	+0.00 ▬	2010-09-07
GDP	n/a
PMI (mfg)	n/a
Unemployment	5.00	5.20	-0.20 ▼	2010-08-29
10Y yield	0.90	1.02	-0.12 ▼	2010-09-01 ⚠
FX vs USD	n/a

Concept libraryL3

Terms marked ✓ are linked inline above — click any dotted term in the text to expand it in place.

2s10s: The gap between the 10-year and 2-year government bond yields. Positive = normal upward-sloping curve; negative ('inverted') = a classic late-cycle/recession warning.
PMI ✓: Purchasing Managers' Index. Above 50 = the sector is expanding vs last month; below 50 = contracting. A timely read on activity.
carry trade: Borrowing in a low-rate currency (long the yen's case) to buy higher-yielding assets elsewhere. It unwinds violently when the funding rate rises or the funding currency strengthens.
credit impulse: The change in the flow of new credit into an economy. A rising impulse front-runs stronger demand for commodities and cyclical goods, with a lag.
cyclicals ✓: Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary.
defensives ✓: Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows.
discount rate: The rate used to convert a future cash flow into today's value. A higher discount rate makes far-off cash flows worth less now.
disinflation: Inflation that is still positive but falling (prices rising more slowly) — distinct from deflation, where prices actually fall.
duration: How sensitive an asset's price is to interest rates. 'Long-duration' assets (long bonds, fast-growing stocks whose profits are years away) move most when rates change.
net interest margin: The spread a bank earns between what it charges on loans and pays on deposits. Higher short rates / steeper curves tend to widen it.
nominal yield: The headline interest rate on a bond, before subtracting inflation.
policy rate: The interest rate a central bank sets directly (e.g. the Fed funds rate, the ECB deposit rate, China's LPR). It anchors all other rates.
rate path: The market's expectation of where the policy rate goes over the next year or two — not just today's level, but the whole expected trajectory.
real yield: The yield after subtracting expected inflation — what a lender actually earns in purchasing power. Real yield ≈ nominal yield − expected inflation.
term premium: The extra yield investors demand to hold a long bond instead of rolling short ones — compensation for tying money up and for issuance/inflation risk.