Macro Intelligence · Weekly · deep read

Macro Regime — 2013-W01

→

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

Read at: thesis narrative mechanism data

↩ Home Macro index ← 2013-01 board

Standing macro backdropBORROWED

Borrowed from its month (2013-01); the weekly reads the standing object, it does not recompute the aggregate.

United States: stall-speed, at target
China: stall-speed, at target
Euro area: disinflationary stall
Japan: deflation watch

month aggregated actuals

United States

Indicator	Basis	2013-01	2012-12	Change
Core CPI	% MoM	0.22 2013-01-01	0.17 2012-12-01	→ 0.05
Core PCE	% YoY	1.59 2013-01-01	1.69 2012-12-01	→ -0.1
CPI (YoY)	% YoY	1.68 2013-01-01	1.76 2012-12-01	→ -0.08
FX vs USD	px	not recorded
GDP	% QoQ ann.	4 2013-01-01	—	—
PMI (mfg)	index	50.7 2013-01-02	49.5 2012-12-03	▲ 1.2
PMI (svc)	index	56.1 2013-01-04	54.7 2012-12-05	▲ 1.4
Policy rate	%	0.25 2013-01-31	0.25 2012-12-31	→ 0
2s10s slope	pp	1.75 2013-01-31	1.53 2012-12-31	▲ 0.22
Unemployment	%	8 2013-01-01	7.9 2012-12-01	→ 0.1
10Y yield	%	2.02 2013-01-31	1.78 2012-12-31	▲ 0.24
2Y yield	%	0.27 2013-01-31	0.25 2012-12-31	→ 0.02

China

Indicator	Basis	2013-01	2012-12	Change
CPI (YoY)	% YoY	2.5 2013-01-11	2 2012-12-09	▲ 0.5
FX vs USD	px	not recorded
GDP	% YoY	7.9 2013-01-18	—	—
PMI (mfg)	index	50.4 2013-01-01	50.6 2012-12-01	→ -0.2
PMI (svc)	index	56.1 2013-01-03	55.6 2012-12-03	▲ 0.5
Policy rate	% (1Y LPR)	not recorded
2s10s slope	pp	0.55 2013-01-31	0.51 2012-12-31	→ 0.03
Unemployment	%	not recorded
10Y yield	%	3.61 2013-01-31	3.57 2012-12-31	→ 0.03
2Y yield	%	3.06 2013-01-31	3.06 2012-12-31	→ -0

Euro area

Indicator	Basis	2013-01	2012-12	Change
CPI (YoY)	% YoY	2.2 2013-01-16	2.2 2012-12-14	→ 0
FX vs USD	px	not recorded
GDP	% YoY	0.4 2013-01-01	-0.2 2012-12-01	▲ 0.6
PMI (mfg)	index	47.5 2013-01-24	46.3 2012-12-14	▲ 1.2
PMI (svc)	index	48.3 2013-01-24	47.8 2012-12-14	▲ 0.5
Policy rate	%	0.75 2013-01-10	0.75 2012-12-06	→ 0
Unemployment	%	11.8 2013-01-08	—	—
10Y yield	%	2.39 2013-01-01	2.1 2012-12-01	▲ 0.3

Japan

Indicator	Basis	2013-01	2012-12	Change
Core CPI	% YoY	-0.6 2013-01-25	-0.5 2012-12-26	→ -0.1
CPI (YoY)	% YoY	-0.1 2013-01-25	-0.2 2012-12-26	→ 0.1
FX vs USD	px	not recorded
GDP	% YoY	4 2013-01-01	—	—
PMI (mfg)		not recorded
Policy rate	%	0.1 2013-01-22	0.1 2012-12-20	→ 0
Unemployment	%	4.3 2013-01-29	4.1 2012-12-30	▲ 0.2
10Y yield	%	0.78 2013-01-01	0.78 2012-12-01	→ -0.01

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

stall-speed, at target

stall · at target · on hold

Growth hovering near flat with inflation roughly at target. A balanced, low-conviction regime — direction depends on which way growth breaks next; watch PMI for the tell.

● 1 active

China

stall-speed, at target

stall · at target · on hold

Growth hovering near flat with inflation roughly at target. A balanced, low-conviction regime — direction depends on which way growth breaks next; watch PMI for the tell.

○ no change

Euro area

disinflationary stall

contraction · at target · on hold

Sub-trend growth with low, easing inflation. Duration and quality tend to lead; cyclicals lag until growth re-accelerates. Policy easing is the usual circuit-breaker.

● 1 active

Japan

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: 49.5 → 50.7 (+1.2)

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

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: 2.09907 → 2.39422 (+0.295151)

The 10-year yield jumps.
Why: The long yield sets the cost of long-term money for the whole economy and the discount ratediscount 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. for the longest cash flows.
The discount rate on all long-dated cash flows rises.
Why: Equity valuations and long-bond prices are present values of distant cash flows; a higher long yield shrinks those present values.
Long-duration growth equities compress, long bonds fall, gold is pressured.
Why: The longest-duration assets are most exposed to the discount-rate move, and a higher real yieldreal yield — The yield after subtracting expected inflation — what a lender actually earns in purchasing power. Real yield ≈ nominal yield − expected inflation. raises the opportunity cost of holding non-yielding gold.

Helps
banks/insurers (reinvestment)cashvalue over growth

Hurts
long-duration growth equitieslong-dated bondsgoldrate-sensitive REITs/utilities

Caveat: Granularity is daily, so a single-session jump can be noise; a sustained multi-session move is the real signal. Distinguish a growth-driven rise (risk-on) from a supply/term-premium rise (risk-off).

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

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)	1.68	1.80	-0.12 ▼	2013-01-01
Core CPI	0.22	0.10	+0.12 ▲	2013-01-01
Core PCE	1.59	1.69	-0.10 ▬	2013-01-01
Policy rate	0.25	0.25	+0.00 ▬	2013-01-06
GDP	4.00	3.10	+0.90 ▲	2013-01-01
PMI (mfg)	50.70	49.50	+1.20 ▲	2013-01-02
PMI (svc)	56.10	54.70	+1.40 ▲	2013-01-04
Unemployment	7.80	8.00	-0.20 ▼	2013-01-04
10Y yield	1.93	1.92	+0.01 ▬	2013-01-04
2Y yield	0.27	0.27	+0.00 ▬	2013-01-04
2s10s slope	1.66	1.65	+0.01 ▬	2013-01-04
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.00	1.70	+0.30 ▲	2012-12-09
Policy rate	n/a
GDP	7.40	7.60	-0.20 ▬	2012-10-18
PMI (mfg)	50.40	50.60	-0.20 ▬	2013-01-01
PMI (svc)	56.10	55.60	+0.50 ▲	2013-01-03
Unemployment	n/a
10Y yield	3.60	3.60	-0.01 ▬	2013-01-06
2Y yield	3.04	3.05	-0.01 ▬	2013-01-06
2s10s slope	0.56	0.55	+0.00 ▬	2013-01-06
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.20	2.20	+0.00 ▬	2013-01-04
Policy rate	0.75	0.75	+0.00 ▬	2012-12-06
GDP	0.40	-0.20	+0.60 ▲	2013-01-01
PMI (mfg)	46.10	46.30	-0.20 ▬	2013-01-02
PMI (svc)	47.80	47.80	+0.00 ▬	2013-01-04
Unemployment	11.70	11.60	+0.10 ▬	2012-11-30
10Y yield	2.39	2.10	+0.30 ▲	2013-01-01
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	-0.20	-0.40	+0.20 ▲	2012-12-26
Core CPI	-0.50	-0.50	+0.00 ▬	2012-12-26
Policy rate	0.10	0.10	+0.00 ▬	2012-12-20
GDP	n/a
PMI (mfg)	n/a
Unemployment	4.10	4.10	+0.00 ▬	2012-12-30
10Y yield	0.78	0.78	-0.01 ▬	2013-01-01
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.