Macro Intelligence · Weekly · deep read

Macro Regime — 2011-W49

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US · China · EU · Japan · mechanism-first, taught

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↩ Home Macro index ← 2011-12 board

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

Standing macro backdropBORROWED

Borrowed from its month (2011-12); 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	2011-12	2011-11	Change
Core CPI	% MoM	0.22 2011-12-01	0.17 2011-11-01	→ 0.05
Core PCE	% YoY	1.97 2011-12-01	1.83 2011-11-01	▲ 0.14
CPI (YoY)	% YoY	3.06 2011-12-01	3.45 2011-11-01	▼ -0.39
FX vs USD	px	not recorded
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	52.7 2011-12-01	50.8 2011-11-01	▲ 1.9
PMI (svc)	index	52 2011-12-05	52.9 2011-11-03	▼ -0.9
Policy rate	%	0.25 2011-12-31	0.25 2011-11-30	→ 0
2s10s slope	pp	1.64 2011-12-30	1.83 2011-11-30	▼ -0.19
Unemployment	%	8.5 2011-12-01	8.6 2011-11-01	→ -0.1
10Y yield	%	1.89 2011-12-30	2.08 2011-11-30	▼ -0.19
2Y yield	%	0.25 2011-12-30	0.25 2011-11-30	→ 0

China

Indicator	Basis	2011-12	2011-11	Change
CPI (YoY)	% YoY	4.2 2011-12-09	5.5 2011-11-09	▼ -1.3
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)	index	50.3 2011-12-01	49 2011-11-01	▲ 1.3
PMI (svc)	index	55.9 2011-12-01	55.5 2011-11-01	▲ 0.4
Policy rate	% (1Y LPR)	not recorded
2s10s slope	pp	0.61 2011-12-31	0.62 2011-11-30	→ -0.01
Unemployment	%	not recorded
10Y yield	%	3.42 2011-12-31	3.61 2011-11-30	▼ -0.19
2Y yield	%	2.81 2011-12-31	2.99 2011-11-30	▼ -0.18

Euro area

Indicator	Basis	2011-12	2011-11	Change
CPI (YoY)	% YoY	3 2011-12-15	3 2011-11-30	→ 0
FX vs USD	px	not recorded
GDP	% YoY	0.1 2011-12-01	0.3 2011-11-01	→ -0.2
PMI (mfg)	index	46.9 2011-12-15	46.4 2011-11-23	▲ 0.5
PMI (svc)	index	48.3 2011-12-15	47.8 2011-11-23	▲ 0.5
Policy rate	%	1 2011-12-08	1.25 2011-11-03	▼ -0.25
Unemployment	%	not recorded
10Y yield	%	4.09 2011-12-01	4.39 2011-11-01	▼ -0.3

Japan

Indicator	Basis	2011-12	2011-11	Change
Core CPI	% YoY	-1.1 2011-12-26	-1 2011-11-25	→ -0.1
CPI (YoY)	% YoY	-0.5 2011-12-26	-0.2 2011-11-25	▼ -0.3
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	0.1 2011-12-21	0.1 2011-11-16	→ 0
Unemployment	%	4.5 2011-12-30	4.4 2011-11-29	→ 0.1
10Y yield	%	0.97 2011-12-01	1.06 2011-11-01	▼ -0.09

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

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

China

overheating / late-cycle

stall · above target · on hold

● 1 active

Euro area ⚠ stale

stagflationary

contraction · above target · easing

Contracting activity *and* above-target inflation — the hardest mix: the central bank can't ease freely. Real assets, energy and value tend to hold up better than long-duration growth and bonds.

● 1 active

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.

● 1 active

Mechanisms & channelsL2

United States

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 50.8 → 52.7 (+1.9)

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: 49 → 50.3 (+1.3)

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

M3Monetary easing (rate cut)

Trigger: policy_rate: 1.25 → 1 (-0.25)

The central bank cuts its policy ratepolicy 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..
Why: The policy rate anchors the entire rate structure, so a cut lowers the risk-free baseline against which every asset is valued.
Discount ratesdiscount 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. fall across asset classes and liquidity expectations rise.
Why: A lower risk-free rate raises the present value of future cash flows everywhere, and a cut signals the bank will keep conditions loose.
Risk assets re-rate up; the currency softens.
Why: Cheaper money flows toward higher-returning assets, and a lower local rate narrows the yield advantage of holding the currency, so it weakens.
The weaker currency lifts exporters, commodities, gold, and EM.
Why: Commodities priced in the easing currency rise in that currency; exporters gain competitiveness; and EM borrowers with dollar debt benefit as the dollar softens.

Helps
equities (broadly)goldEM assetslong-duration bondscommodities

Hurts
the easing currencycash/money-market real yield

Caveat: If the cut is an emergency response to a fast-deteriorating outlook ('cutting into a recession'), equities can fall even as bonds rally — the growth signal outweighs the liquidity boost.

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

What would change the read

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.
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).

Japan

M2Inflation surprise (downside / disinflation)

Trigger: core_cpi: -0.4 → -1 (-0.6)

Core inflation falls more than the prior reading.
Why: A faster-than-expected cooling in the persistent part of inflation tells the market the central bank has more room to ease.
The market prices an earlier or deeper easing path.
Why: Lower inflation removes the reason to keep rates high, so traders pull forward expected cuts into the curve.
Real yieldsreal yield — The yield after subtracting expected inflation — what a lender actually earns in purchasing power. Real yield ≈ nominal yield − expected inflation. fall.
Why: The expected policy rate drops while inflation expectations stay anchored, so the inflation-adjusted return demanded by lenders declines.
A lower discount rate re-rates long-duration assets upward; long bonds rally.
Why: Future cash flows are now discounted less harshly, lifting growth equities most; bond prices rise mechanically as their yields fall.

Helps
long-duration growth equitieslong-dated government bondsgoldrate-sensitive sectors (utilities, REITs)

Hurts
USD (vs easing-laggard peers)bank net-interest margins

Caveat: Misfires if disinflation is driven by demand collapse rather than supply normalization — then the growth scare dominates and risk assets fall despite lower yields.

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.
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.

The dataL3

United States

Indicator	Current	Prior	Δ	As of
CPI (YoY)	3.06	3.50	-0.44 ▼	2011-12-01
Core CPI	0.22	0.10	+0.12 ▲	2011-12-01
Core PCE	1.97	1.83	+0.14 ▲	2011-12-01
Policy rate	0.25	0.25	+0.00 ▬	2011-12-11
GDP	2.00	2.50	-0.50 ▼	2011-11-22
PMI (mfg)	52.70	50.80	+1.90 ▲	2011-12-01
PMI (svc)	52.00	52.90	-0.90 ▼	2011-12-05
Unemployment	8.60	8.50	+0.10 ▬	2011-12-02
10Y yield	2.07	1.99	+0.08 ▲	2011-12-09
2Y yield	0.22	0.22	+0.00 ▬	2011-12-09
2s10s slope	1.85	1.77	+0.08 ▲	2011-12-09
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	4.20	5.50	-1.30 ▼	2011-12-09
Policy rate	n/a
GDP	9.10	9.50	-0.40 ▼	2011-10-18
PMI (mfg)	50.30	49.00	+1.30 ▲	2011-12-01
PMI (svc)	55.90	55.50	+0.40 ▲	2011-12-01
Unemployment	n/a
10Y yield	3.48	3.50	-0.01 ▬	2011-12-09
2Y yield	2.81	2.79	+0.02 ▬	2011-12-09
2s10s slope	0.67	0.71	-0.04 ▬	2011-12-09
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	3.00	3.00	+0.00 ▬	2011-11-30
Policy rate	1.00	1.25	-0.25 ▼	2011-12-08
GDP	0.10	0.30	-0.20 ▬	2011-12-01
PMI (mfg)	46.40	46.40	+0.00 ▬	2011-12-01
PMI (svc)	47.50	47.80	-0.30 ▬	2011-12-05
Unemployment	10.30	10.20	+0.10 ▲	2011-11-30
10Y yield	4.09	4.39	-0.30 ▼	2011-12-01 ⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	-0.20	0.00	-0.20 ▼	2011-11-25
Core CPI	-1.00	-0.40	-0.60 ▼	2011-11-25
Policy rate	0.10	0.10	+0.00 ▬	2011-11-16
GDP	n/a
PMI (mfg)	n/a
Unemployment	4.40	4.20	+0.20 ▲	2011-11-29
10Y yield	0.97	1.06	-0.09 ▼	2011-12-01 ⚠
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.