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Macro Regime — 2013-W08

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↩ Home Macro index ← 2013-02 board

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

Standing macro backdropBORROWED

Borrowed from its month (2013-02); the weekly reads the standing object, it does not recompute the aggregate.

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

month aggregated actuals

United States

Indicator	Basis	2013-02	2013-01	Change
Core CPI	% MoM	0.15 2013-02-01	0.22 2013-01-01	→ -0.07
Core PCE	% YoY	1.56 2013-02-01	1.59 2013-01-01	→ -0.03
CPI (YoY)	% YoY	2.02 2013-02-01	1.68 2013-01-01	▲ 0.34
FX vs USD	px	not recorded
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	53.1 2013-02-01	50.7 2013-01-02	▲ 2.4
PMI (svc)	index	55.2 2013-02-05	56.1 2013-01-04	▼ -0.9
Policy rate	%	0.25 2013-02-28	0.25 2013-01-31	→ 0
2s10s slope	pp	1.64 2013-02-28	1.75 2013-01-31	▼ -0.11
Unemployment	%	7.7 2013-02-01	8 2013-01-01	▼ -0.3
10Y yield	%	1.89 2013-02-28	2.02 2013-01-31	▼ -0.13
2Y yield	%	0.25 2013-02-28	0.27 2013-01-31	→ -0.02

China

Indicator	Basis	2013-02	2013-01	Change
CPI (YoY)	% YoY	2 2013-02-08	2.5 2013-01-11	▼ -0.5
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)	index	50.1 2013-02-01	50.4 2013-01-01	→ -0.3
PMI (svc)	index	56.2 2013-02-03	56.1 2013-01-03	→ 0.1
Policy rate	% (1Y LPR)	not recorded
2s10s slope	pp	0.52 2013-02-28	0.55 2013-01-31	→ -0.03
Unemployment	%	not recorded
10Y yield	%	3.6 2013-02-28	3.61 2013-01-31	→ -0.01
2Y yield	%	3.08 2013-02-28	3.06 2013-01-31	→ 0.02

Euro area

Indicator	Basis	2013-02	2013-01	Change
CPI (YoY)	% YoY	2 2013-02-28	2.2 2013-01-16	▼ -0.2
FX vs USD	px	not recorded
GDP	% YoY	-1 2013-02-01	0.4 2013-01-01	▼ -1.4
PMI (mfg)	index	47.8 2013-02-21	47.5 2013-01-24	→ 0.3
PMI (svc)	index	47.3 2013-02-21	48.3 2013-01-24	▼ -1
Policy rate	%	0.75 2013-02-07	0.75 2013-01-10	→ 0
Unemployment	%	11.7 2013-02-01	11.8 2013-01-08	→ -0.1
10Y yield	%	2.86 2013-02-01	2.39 2013-01-01	▲ 0.46

Japan

Indicator	Basis	2013-02	2013-01	Change
Core CPI	% YoY	-0.7 2013-02-25	-0.6 2013-01-25	→ -0.1
CPI (YoY)	% YoY	-0.3 2013-02-25	-0.1 2013-01-25	▼ -0.2
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	0.1 2013-02-14	0.1 2013-01-22	→ 0
Unemployment	%	not recorded
10Y yield	%	0.67 2013-02-01	0.78 2013-01-01	▼ -0.11

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

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.

● 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 ⚠ stale

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 ⚠ 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: 50.7 → 53.1 (+2.4)

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: 2.39422 → 2.85792 (+0.463705)

⚠ Fired on a stale print: yield_10y as of 2013-02-01 (23d old). The change may predate current conditions — treat as provisional.

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)	1.60	2.02	-0.42 ▼	2013-02-14
Core CPI	0.30	0.15	+0.15 ▲	2013-02-21
Core PCE	1.56	1.59	-0.03 ▬	2013-02-01
Policy rate	0.25	0.25	+0.00 ▬	2013-02-24
GDP	-0.10	4.00	-4.10 ▼	2013-01-30
PMI (mfg)	53.10	50.70	+2.40 ▲	2013-02-01
PMI (svc)	55.20	56.10	-0.90 ▼	2013-02-05
Unemployment	7.70	7.80	-0.10 ▬	2013-02-01
10Y yield	1.97	1.99	-0.02 ▬	2013-02-22
2Y yield	0.27	0.26	+0.01 ▬	2013-02-22
2s10s slope	1.70	1.73	-0.03 ▬	2013-02-22
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.00	2.50	-0.50 ▼	2013-02-08
Policy rate	n/a
GDP	7.90	7.40	+0.50 ▲	2013-01-18
PMI (mfg)	50.10	50.40	-0.30 ▬	2013-02-01
PMI (svc)	56.20	56.10	+0.10 ▬	2013-02-03
Unemployment	n/a
10Y yield	3.57	3.56	+0.01 ▬	2013-02-22
2Y yield	3.02	3.01	+0.00 ▬	2013-02-22
2s10s slope	0.55	0.55	+0.01 ▬	2013-02-22
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.00	2.20	-0.20 ▼	2013-02-01
Policy rate	0.75	0.75	+0.00 ▬	2013-02-07
GDP	-1.00	0.40	-1.40 ▼	2013-02-01
PMI (mfg)	47.80	47.90	-0.10 ▬	2013-02-21
PMI (svc)	47.30	48.60	-1.30 ▼	2013-02-21
Unemployment	11.70	11.80	-0.10 ▼	2013-02-01
10Y yield	2.86	2.39	+0.46 ▲	2013-02-01 ⚠⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	-0.10	-0.20	+0.10 ▬	2013-01-25
Core CPI	-0.60	-0.50	-0.10 ▬	2013-01-25
Policy rate	0.10	0.10	+0.00 ▬	2013-02-14
GDP	n/a
PMI (mfg)	n/a
Unemployment	4.30	4.10	+0.20 ▲	2013-01-29
10Y yield	0.67	0.78	-0.11 ▼	2013-02-01 ⚠⚠
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.