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Macro Regime — 2013-W47

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↩ Home Macro index ← 2013-11 board

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

Standing macro backdropBORROWED

Borrowed from its month (2013-11); the weekly reads the standing object, it does not recompute the aggregate.

United States: goldilocks / reflation
China: overheating / late-cycle
Euro area: disinflationary stall
Japan: disinflationary stall

month aggregated actuals

United States

Indicator	Basis	2013-11	2013-10	Change
Core CPI	% MoM	0.19 2013-11-01	0.09 2013-10-01	→ 0.1
Core PCE	% YoY	1.51 2013-11-01	1.45 2013-10-01	→ 0.06
CPI (YoY)	% YoY	1.23 2013-11-01	0.88 2013-10-01	▲ 0.35
FX vs USD	px	not recorded
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	56.4 2013-11-01	56.2 2013-10-01	→ 0.2
PMI (svc)	index	55.4 2013-11-05	54.4 2013-10-03	▲ 1
Policy rate	%	0.25 2013-11-30	0.25 2013-10-31	→ 0
2s10s slope	pp	2.47 2013-11-29	2.26 2013-10-31	▲ 0.21
Unemployment	%	6.9 2013-11-01	7.2 2013-10-01	▼ -0.3
10Y yield	%	2.75 2013-11-29	2.57 2013-10-31	▲ 0.18
2Y yield	%	0.28 2013-11-29	0.31 2013-10-31	→ -0.03

China

Indicator	Basis	2013-11	2013-10	Change
CPI (YoY)	% YoY	3.2 2013-11-09	3.1 2013-10-14	→ 0.1
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)	index	51.4 2013-11-01	51.4 2013-10-01	→ 0
PMI (svc)	index	56.3 2013-11-03	55.4 2013-10-03	▲ 0.9
Policy rate	% (1Y LPR)	5.73 2013-11-29	5.72 2013-10-31	→ 0.01
2s10s slope	pp	0.2 2013-11-29	0.2 2013-10-31	→ -0.01
Unemployment	%	not recorded
10Y yield	%	4.36 2013-11-29	4.18 2013-10-31	▲ 0.18
2Y yield	%	4.17 2013-11-29	3.98 2013-10-31	▲ 0.19

Euro area

Indicator	Basis	2013-11	2013-10	Change
CPI (YoY)	% YoY	0.9 2013-11-29	0.7 2013-10-31	▲ 0.2
FX vs USD	px	not recorded
GDP	% YoY	-0.1 2013-11-15	0.5 2013-10-16	▼ -0.6
PMI (mfg)	index	51.5 2013-11-21	51.3 2013-10-24	→ 0.2
PMI (svc)	index	50.9 2013-11-21	50.9 2013-10-24	→ 0
Policy rate	%	0.25 2013-11-07	0.5 2013-10-02	▼ -0.25
Unemployment	%	12.1 2013-11-29	12.2 2013-10-31	→ -0.1
10Y yield	%	3.17 2013-11-01	3.16 2013-10-01	→ 0.01

Japan

Indicator	Basis	2013-11	2013-10	Change
Core CPI	% YoY	0.3 2013-11-25	0 2013-10-26	▲ 0.3
CPI (YoY)	% YoY	1.1 2013-11-25	1.1 2013-10-26	→ 0
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	0.1 2013-11-21	0.1 2013-10-31	→ 0
Unemployment	%	4 2013-11-29	4 2013-10-30	→ 0
10Y yield	%	0.6 2013-11-01	0.59 2013-10-01	→ 0.01

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

goldilocks / reflation

expansion · below target · on hold

Improving growth with inflation at/below target — the benign mix. Cyclicals, small-caps and risk assets broadly tend to lead; long bonds lag as growth firms.

○ no change

China

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.

○ no change

Euro area ⚠ stale

disinflationary stall

stall · 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

disinflationary stall

unknown · below 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.

○ no change

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

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.

Euro area

M3Monetary easing (rate cut)

Trigger: policy_rate: 0.5 → 0.25 (-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

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)	1.00	1.23	-0.23 ▼	2013-11-14
Core CPI	0.10	0.19	-0.09 ▬	2013-11-20
Core PCE	1.51	1.45	+0.06 ▬	2013-11-01
Policy rate	0.25	0.25	+0.00 ▬	2013-11-24
GDP	2.80	3.50	-0.70 ▼	2013-11-07
PMI (mfg)	56.40	56.20	+0.20 ▬	2013-11-01
PMI (svc)	55.40	54.40	+1.00 ▲	2013-11-05
Unemployment	7.30	6.90	+0.40 ▲	2013-11-08
10Y yield	2.75	2.79	-0.04 ▬	2013-11-22
2Y yield	0.31	0.29	+0.02 ▬	2013-11-22
2s10s slope	2.44	2.50	-0.06 ▼	2013-11-22
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	3.20	3.10	+0.10 ▲	2013-11-09
Policy rate	5.73	5.73	+0.00 ▬	2013-11-22
GDP	7.80	7.50	+0.30 ▲	2013-10-18
PMI (mfg)	51.40	51.40	+0.00 ▬	2013-11-01
PMI (svc)	56.30	55.40	+0.90 ▲	2013-11-03
Unemployment	n/a
10Y yield	4.65	4.70	-0.05 ▬	2013-11-22
2Y yield	4.31	4.36	-0.05 ▼	2013-11-22
2s10s slope	0.35	0.34	+0.00 ▬	2013-11-22
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.70	0.70	+0.00 ▬	2013-11-15
Policy rate	0.25	0.50	-0.25 ▼	2013-11-07
GDP	-0.10	0.50	-0.60 ▼	2013-11-15
PMI (mfg)	51.50	51.30	+0.20 ▬	2013-11-21
PMI (svc)	50.90	51.60	-0.70 ▼	2013-11-21
Unemployment	12.20	12.00	+0.20 ▲	2013-10-31
10Y yield	3.17	3.16	+0.01 ▬	2013-11-01 ⚠⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.10	0.90	+0.20 ▲	2013-10-26
Core CPI	0.00	-0.10	+0.10 ▬	2013-10-26
Policy rate	0.10	0.10	+0.00 ▬	2013-11-21
GDP	n/a
PMI (mfg)	n/a
Unemployment	4.00	4.10	-0.10 ▬	2013-10-30
10Y yield	0.60	0.59	+0.01 ▬	2013-11-01 ⚠⚠
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.