Macro Intelligence · Weekly · deep read

Macro Regime — 2011-W40

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↩ Home Macro index ← 2011-10 board

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

Standing macro backdropBORROWED

Borrowed from its month (2011-10); the weekly reads the standing object, it does not recompute the aggregate.

United States: overheating / late-cycle
China: overheating / late-cycle
Euro area: stagflationary
Japan: deflation watch

month aggregated actuals

United States

Indicator	Basis	2011-10	2011-09	Change
Core CPI	% MoM	0.17 2011-10-01	0.11 2011-09-01	→ 0.06
Core PCE	% YoY	1.74 2011-10-01	1.85 2011-09-01	▼ -0.11
CPI (YoY)	% YoY	3.52 2011-10-01	3.81 2011-09-01	▼ -0.29
FX vs USD	px	not recorded
GDP	% QoQ ann.	4.6 2011-10-01	—	—
PMI (mfg)	index	51.6 2011-10-03	50.6 2011-09-01	▲ 1
PMI (svc)	index	53 2011-10-05	53.3 2011-09-06	→ -0.3
Policy rate	%	0.25 2011-10-31	0.25 2011-09-30	→ 0
2s10s slope	pp	1.92 2011-10-31	1.67 2011-09-30	▲ 0.25
Unemployment	%	8.8 2011-10-01	9 2011-09-01	▼ -0.2
10Y yield	%	2.17 2011-10-31	1.92 2011-09-30	▲ 0.25
2Y yield	%	0.25 2011-10-31	0.25 2011-09-30	→ 0

China

Indicator	Basis	2011-10	2011-09	Change
CPI (YoY)	% YoY	6.1 2011-10-14	6.2 2011-09-09	→ -0.1
FX vs USD	px	not recorded
GDP	% YoY	9.1 2011-10-18	—	—
PMI (mfg)	index	50.4 2011-10-01	51.2 2011-09-01	▼ -0.8
PMI (svc)	index	55.8 2011-10-01	57.1 2011-09-01	▼ -1.3
Policy rate	% (1Y LPR)	not recorded
2s10s slope	pp	0.34 2011-10-31	0.19 2011-09-30	▲ 0.15
Unemployment	%	not recorded
10Y yield	%	3.76 2011-10-31	3.86 2011-09-30	▼ -0.1
2Y yield	%	3.42 2011-10-31	3.67 2011-09-30	▼ -0.25

Euro area

Indicator	Basis	2011-10	2011-09	Change
CPI (YoY)	% YoY	3 2011-10-31	3 2011-09-30	→ 0
FX vs USD	px	not recorded
GDP	% YoY	0.8 2011-10-01	0.2 2011-09-01	▲ 0.6
PMI (mfg)	index	47.3 2011-10-24	48.4 2011-09-22	▼ -1.1
PMI (svc)	index	47.2 2011-10-24	49.1 2011-09-22	▼ -1.9
Policy rate	%	1.5 2011-10-06	1.5 2011-09-08	→ 0
Unemployment	%	10.2 2011-10-31	10 2011-09-30	▲ 0.2
10Y yield	%	4.08 2011-10-01	4.03 2011-09-01	→ 0.04

Japan

Indicator	Basis	2011-10	2011-09	Change
Core CPI	% YoY	-0.4 2011-10-26	-0.5 2011-09-25	→ 0.1
CPI (YoY)	% YoY	0 2011-10-26	0.2 2011-09-25	▼ -0.2
FX vs USD	px	not recorded
GDP	% YoY	1.29 2011-10-01	—	—
PMI (mfg)		not recorded
Policy rate	%	0.1 2011-10-27	0.1 2011-09-07	→ 0
Unemployment	%	4.2 2011-10-30	4.5 2011-09-29	▼ -0.3
10Y yield	%	1.04 2011-10-01	0.97 2011-09-01	▲ 0.06

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

overheating / late-cycle

stall · 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

China

overheating / late-cycle

stall · above target · on hold

○ no change

Euro area ⚠ stale

overheating / late-cycle

stall · above target · on hold

○ 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: 50.6 → 51.6 (+1)

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

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

What would change the read

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.
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.

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)	3.52	3.80	-0.28 ▼	2011-10-01
Core CPI	0.17	0.20	-0.03 ▬	2011-10-01
Core PCE	1.74	1.85	-0.11 ▼	2011-10-01
Policy rate	0.25	0.25	+0.00 ▬	2011-10-09
GDP	4.60	1.30	+3.30 ▲	2011-10-01
PMI (mfg)	51.60	50.60	+1.00 ▲	2011-10-03
PMI (svc)	53.00	53.30	-0.30 ▬	2011-10-05
Unemployment	9.10	8.80	+0.30 ▲	2011-10-07
10Y yield	2.10	2.01	+0.09 ▲	2011-10-07
2Y yield	0.30	0.29	+0.01 ▬	2011-10-07
2s10s slope	1.80	1.72	+0.08 ▲	2011-10-07
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	6.20	6.50	-0.30 ▼	2011-09-09
Policy rate	n/a
GDP	9.50	9.70	-0.20 ▬	2011-07-13
PMI (mfg)	50.40	51.20	-0.80 ▼	2011-10-01
PMI (svc)	55.80	57.10	-1.30 ▼	2011-10-01
Unemployment	n/a
10Y yield	3.81	3.86	-0.05 ▼	2011-10-09
2Y yield	3.61	3.66	-0.05 ▬	2011-10-09
2s10s slope	0.19	0.20	-0.01 ▬	2011-10-09
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	3.00	2.50	+0.50 ▲	2011-09-30
Policy rate	1.50	1.50	+0.00 ▬	2011-10-06
GDP	0.80	0.20	+0.60 ▲	2011-10-01
PMI (mfg)	48.50	48.40	+0.10 ▬	2011-10-03
PMI (svc)	48.80	49.10	-0.30 ▼	2011-10-05
Unemployment	10.00	10.00	+0.00 ▬	2011-09-30
10Y yield	4.08	4.03	+0.04 ▬	2011-10-01 ⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.20	0.20	+0.00 ▬	2011-09-25
Core CPI	-0.50	-0.50	+0.00 ▬	2011-09-25
Policy rate	0.10	0.10	+0.00 ▬	2011-10-07
GDP	n/a
PMI (mfg)	n/a
Unemployment	4.50	4.70	-0.20 ▼	2011-09-29
10Y yield	1.04	0.97	+0.06 ▲	2011-10-01 ⚠
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.