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Macro Regime — 2013-W19

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↩ Home Macro index ← 2013-05 board

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

Standing macro backdropBORROWED

Borrowed from its month (2013-05); the weekly reads the standing object, it does not recompute the aggregate.

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

month aggregated actuals

United States

Indicator	Basis	2013-05	2013-04	Change
Core CPI	% MoM	0.07 2013-05-01	0.02 2013-04-01	→ 0.05
Core PCE	% YoY	1.39 2013-05-01	1.38 2013-04-01	→ 0.01
CPI (YoY)	% YoY	1.39 2013-05-01	1.14 2013-04-01	▲ 0.25
FX vs USD	px	not recorded
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	50.7 2013-05-01	51.3 2013-04-01	▼ -0.6
PMI (svc)	index	53.1 2013-05-03	54.4 2013-04-03	▼ -1.3
Policy rate	%	0.25 2013-05-31	0.25 2013-04-30	→ 0
2s10s slope	pp	1.86 2013-05-31	1.48 2013-04-30	▲ 0.38
Unemployment	%	7.5 2013-05-01	7.6 2013-04-01	→ -0.1
10Y yield	%	2.16 2013-05-31	1.7 2013-04-30	▲ 0.46
2Y yield	%	0.3 2013-05-31	0.22 2013-04-30	▲ 0.08

China

Indicator	Basis	2013-05	2013-04	Change
CPI (YoY)	% YoY	2.4 2013-05-09	2.1 2013-04-09	▲ 0.3
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)	index	50.8 2013-05-01	50.6 2013-04-01	→ 0.2
PMI (svc)	index	54.5 2013-05-03	55.6 2013-04-03	▼ -1.1
Policy rate	% (1Y LPR)	not recorded
2s10s slope	pp	0.39 2013-05-31	0.47 2013-04-28	▼ -0.08
Unemployment	%	not recorded
10Y yield	%	3.44 2013-05-31	3.43 2013-04-28	→ 0.01
2Y yield	%	3.05 2013-05-31	2.96 2013-04-28	▲ 0.09

Euro area

Indicator	Basis	2013-05	2013-04	Change
CPI (YoY)	% YoY	1.4 2013-05-31	1.2 2013-04-30	▲ 0.2
FX vs USD	px	not recorded
GDP	% YoY	-0.1 2013-05-01	1.2 2013-04-01	▼ -1.3
PMI (mfg)	index	47.8 2013-05-23	46.5 2013-04-23	▲ 1.3
PMI (svc)	index	47.5 2013-05-23	46.6 2013-04-23	▲ 0.9
Policy rate	%	0.5 2013-05-02	0.75 2013-04-04	▼ -0.25
Unemployment	%	12.2 2013-05-31	12.1 2013-04-30	→ 0.1
10Y yield	%	2.68 2013-05-01	2.86 2013-04-01	▼ -0.17

Japan

Indicator	Basis	2013-05	2013-04	Change
Core CPI	% YoY	-0.6 2013-05-26	-0.8 2013-04-25	▲ 0.2
CPI (YoY)	% YoY	-0.7 2013-05-26	-0.9 2013-04-25	▲ 0.2
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	0.1 2013-05-22	0.1 2013-04-26	→ 0
Unemployment	%	4.1 2013-05-30	4.1 2013-04-29	→ 0
10Y yield	%	0.88 2013-05-01	0.59 2013-04-01	▲ 0.29

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.

○ no change

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 · below target · easing

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.

● 1 active

Mechanisms & channelsL2

United States

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.

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

M3Monetary easing (rate cut)

Trigger: policy_rate: 0.75 → 0.5 (-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

M9Long-end yield spike / term-premium rise

Trigger: yield_10y: 0.589 → 0.879 (+0.29)

⚠ Fired on a stale print: yield_10y as of 2013-05-01 (11d 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 rate 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

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)	1.39	1.50	-0.11 ▼	2013-05-01
Core CPI	0.07	0.10	-0.03 ▬	2013-05-01
Core PCE	1.39	1.38	+0.01 ▬	2013-05-01
Policy rate	0.25	0.25	+0.00 ▬	2013-05-12
GDP	2.50	1.10	+1.40 ▲	2013-04-26
PMI (mfg)	50.70	51.30	-0.60 ▼	2013-05-01
PMI (svc)	53.10	54.40	-1.30 ▼	2013-05-03
Unemployment	7.50	7.50	+0.00 ▬	2013-05-03
10Y yield	1.90	1.81	+0.09 ▲	2013-05-10
2Y yield	0.26	0.22	+0.04 ▬	2013-05-10
2s10s slope	1.64	1.59	+0.05 ▬	2013-05-10
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.40	2.10	+0.30 ▲	2013-05-09
Policy rate	n/a
GDP	7.70	7.90	-0.20 ▼	2013-04-15
PMI (mfg)	50.80	50.60	+0.20 ▬	2013-05-01
PMI (svc)	54.50	55.60	-1.10 ▼	2013-05-03
Unemployment	n/a
10Y yield	3.42	3.43	-0.01 ▬	2013-05-10
2Y yield	2.99	2.97	+0.02 ▬	2013-05-10
2s10s slope	0.43	0.46	-0.03 ▬	2013-05-10
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.20	1.70	-0.50 ▼	2013-04-30
Policy rate	0.50	0.75	-0.25 ▼	2013-05-02
GDP	-0.10	1.20	-1.30 ▼	2013-05-01
PMI (mfg)	46.70	46.50	+0.20 ▬	2013-05-02
PMI (svc)	47.00	46.60	+0.40 ▲	2013-05-06
Unemployment	12.10	12.00	+0.10 ▬	2013-04-30
10Y yield	2.68	2.86	-0.17 ▼	2013-05-01 ⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	-0.90	-0.70	-0.20 ▼	2013-04-25
Core CPI	-0.80	-0.90	+0.10 ▬	2013-04-25
Policy rate	0.10	0.10	+0.00 ▬	2013-04-26
GDP	n/a
PMI (mfg)	n/a
Unemployment	4.10	4.30	-0.20 ▼	2013-04-29
10Y yield	0.88	0.59	+0.29 ▲	2013-05-01 ⚠
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.