Macro Intelligence · Weekly · deep read

Macro Regime — 2014-W19

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↩ Home Macro index ← 2014-05 board

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

Standing macro backdropBORROWED

Borrowed from its month (2014-05); the weekly reads the standing object, it does not recompute the aggregate.

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

month aggregated actuals

United States

Indicator	Basis	2014-05	2014-04	Change
Core CPI	% MoM	0.19 2014-05-01	0.19 2014-04-01	→ 0
Core PCE	% YoY	1.62 2014-05-01	1.57 2014-04-01	→ 0.05
CPI (YoY)	% YoY	2.17 2014-05-01	2.02 2014-04-01	▲ 0.15
FX vs USD	px	not recorded
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	54.9 2014-05-01	53.7 2014-04-01	▲ 1.2
PMI (svc)	index	55.2 2014-05-05	53.1 2014-04-03	▲ 2.1
Policy rate	%	0.25 2014-05-31	0.25 2014-04-30	→ 0
2s10s slope	pp	2.11 2014-05-30	2.25 2014-04-30	▼ -0.14
Unemployment	%	6.3 2014-05-01	6.2 2014-04-01	→ 0.1
10Y yield	%	2.48 2014-05-30	2.67 2014-04-30	▼ -0.19
2Y yield	%	0.37 2014-05-30	0.42 2014-04-30	→ -0.05

China

Indicator	Basis	2014-05	2014-04	Change
CPI (YoY)	% YoY	1.8 2014-05-09	2.4 2014-04-11	▼ -0.6
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)	index	50.8 2014-05-01	50.4 2014-04-01	▲ 0.4
PMI (svc)	index	54.8 2014-05-03	54.5 2014-04-03	→ 0.3
Policy rate	% (1Y LPR)	5.77 2014-05-30	5.77 2014-04-30	→ 0
2s10s slope	pp	0.4 2014-05-30	0.58 2014-04-30	▼ -0.18
Unemployment	%	not recorded
10Y yield	%	4.07 2014-05-30	4.3 2014-04-30	▼ -0.23
2Y yield	%	3.67 2014-05-30	3.72 2014-04-30	▼ -0.05

Euro area

Indicator	Basis	2014-05	2014-04	Change
CPI (YoY)	% YoY	0.7 2014-05-15	0.7 2014-04-30	→ 0
FX vs USD	px	not recorded
GDP	% YoY	0.2 2014-05-15	0.9 2014-04-16	▼ -0.7
PMI (mfg)	index	52.5 2014-05-22	53.3 2014-04-23	▼ -0.8
PMI (svc)	index	53.5 2014-05-22	53.1 2014-04-23	▲ 0.4
Policy rate	%	0.25 2014-05-08	0.25 2014-04-03	→ 0
Unemployment	%	11.8 2014-05-02	11.9 2014-04-01	→ -0.1
10Y yield	%	2.55 2014-05-01	2.61 2014-04-01	▼ -0.06

Japan

Indicator	Basis	2014-05	2014-04	Change
Core CPI	% YoY	2.3 2014-05-26	0.7 2014-04-25	▲ 1.6
CPI (YoY)	% YoY	3.4 2014-05-26	1.6 2014-04-25	▲ 1.8
FX vs USD	px	not recorded
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	0.1 2014-05-21	0.1 2014-04-30	→ 0
Unemployment	%	3.6 2014-05-30	3.6 2014-04-29	→ 0
10Y yield	%	0.57 2014-05-01	0.61 2014-04-01	→ -0.04

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.

● 1 active

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: 53.7 → 54.9 (+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

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 50.4 → 50.8 (+0.4)

Manufacturing PMI 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.
Cyclicals, small-caps, EM and commodities lead; defensives 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

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 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).

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)	2.17	1.50	+0.67 ▲	2014-05-01
Core CPI	0.19	0.20	-0.01 ▬	2014-05-01
Core PCE	1.62	1.57	+0.05 ▬	2014-05-01
Policy rate	0.25	0.25	+0.00 ▬	2014-05-11
GDP	0.10	5.30	-5.20 ▼	2014-04-30
PMI (mfg)	54.90	53.70	+1.20 ▲	2014-05-01
PMI (svc)	55.20	53.10	+2.10 ▲	2014-05-05
Unemployment	6.30	6.30	+0.00 ▬	2014-05-02
10Y yield	2.62	2.61	+0.01 ▬	2014-05-09
2Y yield	0.40	0.40	+0.00 ▬	2014-05-09
2s10s slope	2.22	2.21	+0.01 ▬	2014-05-09
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.80	2.40	-0.60 ▼	2014-05-09
Policy rate	5.77	5.77	+0.00 ▬	2014-05-09
GDP	7.40	7.70	-0.30 ▼	2014-04-16
PMI (mfg)	50.80	50.40	+0.40 ▲	2014-05-01
PMI (svc)	54.80	54.50	+0.30 ▬	2014-05-03
Unemployment	n/a
10Y yield	4.12	4.23	-0.11 ▼	2014-05-09
2Y yield	3.64	3.71	-0.07 ▼	2014-05-09
2s10s slope	0.48	0.52	-0.04 ▬	2014-05-09
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.70	0.50	+0.20 ▲	2014-04-30
Policy rate	0.25	0.25	+0.00 ▬	2014-05-08
GDP	0.90	0.30	+0.60 ▲	2014-04-16
PMI (mfg)	53.40	53.30	+0.10 ▬	2014-05-02
PMI (svc)	53.10	53.10	+0.00 ▬	2014-05-06
Unemployment	11.80	11.90	-0.10 ▬	2014-05-02
10Y yield	2.55	2.61	-0.06 ▼	2014-05-01 ⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.60	1.50	+0.10 ▲	2014-04-25
Core CPI	0.70	0.80	-0.10 ▼	2014-04-25
Policy rate	0.10	0.10	+0.00 ▬	2014-04-30
GDP	n/a
PMI (mfg)	n/a
Unemployment	3.60	3.60	+0.00 ▬	2014-04-29
10Y yield	0.57	0.61	-0.04 ▬	2014-05-01 ⚠
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.