Macro Intelligence · Weekly · deep read

Macro Regime — 2014-W10

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↩ Home Macro index ← 2014-03 board

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

Standing macro backdropBORROWED

Borrowed from its month (2014-03); the weekly reads the standing object, it does not recompute the aggregate.

United States: goldilocks / reflation
China: stall-speed, at target
Euro area: goldilocks / reflation
Japan: stall-speed, at target

month aggregated actuals

United States

Indicator	Basis	2014-03	2014-02	Change
Core CPI	% MoM	0.19 2014-03-01	0.09 2014-02-01	→ 0.1
Core PCE	% YoY	1.45 2014-03-01	1.39 2014-02-01	→ 0.06
CPI (YoY)	% YoY	1.61 2014-03-01	1.12 2014-02-01	▲ 0.49
FX vs USD	px	not recorded
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	53.2 2014-03-03	51.3 2014-02-03	▲ 1.9
PMI (svc)	index	51.6 2014-03-05	54 2014-02-05	▼ -2.4
Policy rate	%	0.25 2014-03-31	0.25 2014-02-28	→ 0
2s10s slope	pp	2.29 2014-03-31	2.33 2014-02-28	→ -0.04
Unemployment	%	6.7 2014-03-01	6.7 2014-02-01	→ 0
10Y yield	%	2.73 2014-03-31	2.66 2014-02-28	▲ 0.07
2Y yield	%	0.44 2014-03-31	0.33 2014-02-28	▲ 0.11

China

Indicator	Basis	2014-03	2014-02	Change
CPI (YoY)	% YoY	2 2014-03-09	2.5 2014-02-14	▼ -0.5
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)	index	50.3 2014-03-01	50.2 2014-02-01	→ 0.1
PMI (svc)	index	55 2014-03-03	53.4 2014-02-03	▲ 1.6
Policy rate	% (1Y LPR)	5.76 2014-03-31	5.76 2014-02-28	→ 0
2s10s slope	pp	1.09 2014-03-31	0.89 2014-02-28	▲ 0.21
Unemployment	%	not recorded
10Y yield	%	4.5 2014-03-31	4.43 2014-02-28	▲ 0.07
2Y yield	%	3.41 2014-03-31	3.54 2014-02-28	▼ -0.13

Euro area

Indicator	Basis	2014-03	2014-02	Change
CPI (YoY)	% YoY	0.5 2014-03-31	0.8 2014-02-28	▼ -0.3
FX vs USD	px	not recorded
GDP	% YoY	0.3 2014-03-17	-1.1 2014-02-24	▲ 1.4
PMI (mfg)	index	53 2014-03-24	53 2014-02-20	→ 0
PMI (svc)	index	52.4 2014-03-24	51.7 2014-02-20	▲ 0.7
Policy rate	%	0.25 2014-03-06	0.25 2014-02-06	→ 0
Unemployment	%	not recorded
10Y yield	%	2.89 2014-03-01	3.09 2014-02-01	▼ -0.2

Japan

Indicator	Basis	2014-03	2014-02	Change
Core CPI	% YoY	0.8 2014-03-28	0.7 2014-02-25	→ 0.1
CPI (YoY)	% YoY	1.5 2014-03-28	1.4 2014-02-25	→ 0.1
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	0.1 2014-03-11	0.1 2014-02-18	→ 0
Unemployment	%	3.7 2014-03-01	—	—
10Y yield	%	0.6 2014-03-01	0.59 2014-02-01	→ 0.02

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

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

Japan ⚠ stale

stall-speed, at target

unknown · 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

Mechanisms & channelsL2

United States

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 51.3 → 53.2 (+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

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

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.

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)	1.61	1.60	+0.01 ▬	2014-03-01
Core CPI	0.19	0.10	+0.09 ▬	2014-03-01
Core PCE	1.45	1.39	+0.06 ▬	2014-03-01
Policy rate	0.25	0.25	+0.00 ▬	2014-03-09
GDP	2.40	3.20	-0.80 ▼	2014-02-28
PMI (mfg)	53.20	51.30	+1.90 ▲	2014-03-03
PMI (svc)	51.60	54.00	-2.40 ▼	2014-03-05
Unemployment	6.70	6.70	+0.00 ▬	2014-03-07
10Y yield	2.80	2.74	+0.06 ▲	2014-03-07
2Y yield	0.38	0.37	+0.01 ▬	2014-03-07
2s10s slope	2.42	2.37	+0.05 ▬	2014-03-07
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.00	2.50	-0.50 ▼	2014-03-09
Policy rate	5.76	5.76	+0.00 ▬	2014-03-07
GDP	7.70	7.80	-0.10 ▬	2014-01-20
PMI (mfg)	50.30	50.20	+0.10 ▬	2014-03-01
PMI (svc)	55.00	53.40	+1.60 ▲	2014-03-03
Unemployment	n/a
10Y yield	4.51	4.51	-0.00 ▬	2014-03-07
2Y yield	3.63	3.65	-0.02 ▬	2014-03-07
2s10s slope	0.88	0.86	+0.02 ▬	2014-03-07
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.80	0.80	+0.00 ▬	2014-02-28
Policy rate	0.25	0.25	+0.00 ▬	2014-03-06
GDP	-1.10	0.30	-1.40 ▼	2014-02-24
PMI (mfg)	53.20	53.00	+0.20 ▬	2014-03-03
PMI (svc)	52.60	51.70	+0.90 ▲	2014-03-05
Unemployment	12.00	12.00	+0.00 ▬	2014-02-28
10Y yield	2.89	3.09	-0.20 ▼	2014-03-01 ⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.40	1.60	-0.20 ▼	2014-02-25
Core CPI	0.70	0.70	+0.00 ▬	2014-02-25
Policy rate	0.10	0.10	+0.00 ▬	2014-02-18
GDP	n/a
PMI (mfg)	n/a
Unemployment	3.70	3.70	+0.00 ▬	2014-03-01
10Y yield	0.60	0.59	+0.02 ▬	2014-03-01 ⚠
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.