Macro Intelligence · Weekly · deep read

Macro Regime — 2015-W29

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↩ Home Macro index ← 2015-07 board

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

Standing macro backdropBORROWED

Borrowed from its month (2015-07); 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: disinflationary stall

month aggregated actuals

United States

Indicator	Basis	2015-07	2015-06	Change
Core CPI	% MoM	0.21 2015-07-01	0.16 2015-06-01	→ 0.05
Core PCE	% YoY	1.18 2015-07-01	1.25 2015-06-01	→ -0.07
CPI (YoY)	% YoY	0.23 2015-07-01	0.18 2015-06-01	→ 0.05
FX vs USD	px	not recorded
GDP	% QoQ ann.	1.6 2015-07-01	—	—
PMI (mfg)	index	53.5 2015-07-01	52.8 2015-06-01	▲ 0.7
PMI (svc)	index	56 2015-07-06	55.7 2015-06-03	→ 0.3
Policy rate	%	0.25 2015-07-31	0.25 2015-06-30	→ 0
2s10s slope	pp	1.53 2015-07-31	1.71 2015-06-30	▼ -0.18
Unemployment	%	5.2 2015-07-01	5.3 2015-06-01	→ -0.1
10Y yield	%	2.2 2015-07-31	2.35 2015-06-30	▼ -0.15
2Y yield	%	0.67 2015-07-31	0.64 2015-06-30	→ 0.03

China

Indicator	Basis	2015-07	2015-06	Change
CPI (YoY)	% YoY	1.4 2015-07-09	1.2 2015-06-09	▲ 0.2
FX vs USD	px	not recorded
GDP	% YoY	7 2015-07-15	—	—
PMI (mfg)	index	50 2015-07-01	50.2 2015-06-01	→ -0.2
PMI (svc)	index	53.8 2015-07-01	53.2 2015-06-01	▲ 0.6
Policy rate	% (1Y LPR)	4.8 2015-07-31	4.8 2015-06-30	→ 0
2s10s slope	pp	0.9 2015-07-31	1.25 2015-06-30	▼ -0.35
Unemployment	%	not recorded
10Y yield	%	3.48 2015-07-31	3.6 2015-06-30	▼ -0.12
2Y yield	%	2.57 2015-07-31	2.34 2015-06-30	▲ 0.23

Euro area

Indicator	Basis	2015-07	2015-06	Change
CPI (YoY)	% YoY	0.2 2015-07-31	0.2 2015-06-30	→ 0
FX vs USD	px	not recorded
GDP	% YoY	0 2015-07-16	0.2 2015-06-17	→ -0.2
PMI (mfg)	index	52.2 2015-07-24	52.5 2015-06-23	→ -0.3
PMI (svc)	index	53.8 2015-07-24	54.4 2015-06-23	▼ -0.6
Policy rate	%	0.05 2015-07-16	0.05 2015-06-03	→ 0
Unemployment	%	11.1 2015-07-31	11.1 2015-06-30	→ 0
10Y yield	%	1.53 2015-07-01	1.66 2015-06-01	▼ -0.13

Japan

Indicator	Basis	2015-07	2015-06	Change
Core CPI	% YoY	0.6 2015-07-31	0.4 2015-06-26	▲ 0.2
CPI (YoY)	% YoY	0.4 2015-07-31	0.5 2015-06-26	→ -0.1
FX vs USD	px	not recorded
GDP	% YoY	5.34 2015-07-01	—	—
PMI (mfg)		not recorded
Policy rate	%	0.1 2015-07-15	0.1 2015-06-19	→ 0
Unemployment	%	3.4 2015-07-31	3.3 2015-06-26	→ 0.1
10Y yield	%	0.41 2015-07-01	0.46 2015-06-01	→ -0.04

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

goldilocks / reflation

expansion · deflation risk · 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.

● 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 · deflation risk · 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

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

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 52.8 → 53.5 (+0.7)

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)	0.10	0.23	-0.13 ▼	2015-07-17
Core CPI	0.20	0.21	-0.01 ▬	2015-07-17
Core PCE	1.18	1.20	-0.02 ▬	2015-07-01
Policy rate	0.25	0.25	+0.00 ▬	2015-07-19
GDP	1.60	-0.20	+1.80 ▲	2015-07-01
PMI (mfg)	53.50	52.80	+0.70 ▲	2015-07-01
PMI (svc)	56.00	55.70	+0.30 ▬	2015-07-06
Unemployment	5.30	5.20	+0.10 ▬	2015-07-02
10Y yield	2.34	2.36	-0.02 ▬	2015-07-17
2Y yield	0.68	0.67	+0.01 ▬	2015-07-17
2s10s slope	1.66	1.69	-0.03 ▬	2015-07-17
FX vs USD	n/a

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.40	1.20	+0.20 ▲	2015-07-09
Policy rate	4.80	4.80	+0.00 ▬	2015-07-17
GDP	7.00	7.00	+0.00 ▬	2015-07-15
PMI (mfg)	50.00	50.20	-0.20 ▬	2015-07-01
PMI (svc)	53.80	53.20	+0.60 ▲	2015-07-01
Unemployment	n/a
10Y yield	3.51	3.52	-0.01 ▬	2015-07-17
2Y yield	2.65	2.65	+0.00 ▬	2015-07-17
2s10s slope	0.86	0.87	-0.01 ▬	2015-07-17
FX vs USD	n/a

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.20	0.20	+0.00 ▬	2015-07-16
Policy rate	0.05	0.05	+0.00 ▬	2015-07-16
GDP	0.00	0.20	-0.20 ▬	2015-07-16
PMI (mfg)	52.50	52.50	+0.00 ▬	2015-07-01
PMI (svc)	54.40	54.40	+0.00 ▬	2015-07-03
Unemployment	11.10	11.10	+0.00 ▬	2015-06-30
10Y yield	1.53	1.66	-0.13 ▼	2015-07-01 ⚠⚠
FX vs USD	n/a

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.50	0.60	-0.10 ▬	2015-06-26
Core CPI	0.40	0.40	+0.00 ▬	2015-06-26
Policy rate	0.10	0.10	+0.00 ▬	2015-07-15
GDP	n/a
PMI (mfg)	n/a
Unemployment	3.30	3.30	+0.00 ▬	2015-06-26
10Y yield	0.41	0.46	-0.04 ▬	2015-07-01 ⚠⚠
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.