Macro Intelligence · Weekly · deep read

Macro Regime — 2019-W13

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US · China · EU · Japan · mechanism-first, taught

Read at: thesis narrative mechanism data

↩ Home Macro index ← 2019-03 board

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

Standing macro backdropBORROWED

Borrowed from its month (2019-03); the weekly reads the standing object, it does not recompute the aggregate.

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

month aggregated actuals

United States

Indicator	Basis	2019-03	2019-02	Change
Core CPI	% MoM	0.15 2019-03-01	0.16 2019-02-01	→ -0.01
Core PCE	% YoY	1.62 2019-03-01	1.74 2019-02-01	▼ -0.12
CPI (YoY)	% YoY	1.88 2019-03-01	1.52 2019-02-01	▲ 0.36
FX vs USD	px	97.28 2019-03-29	96.16 2019-02-28	▲ 1.12
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	54.2 2019-03-01	56.6 2019-02-01	▼ -2.4
PMI (svc)	index	59.7 2019-03-05	56.7 2019-02-05	▲ 3
Policy rate	%	2.5 2019-03-31	2.5 2019-02-28	→ 0
2s10s slope	pp	0.14 2019-03-29	0.21 2019-02-28	▼ -0.07
Unemployment	%	3.8 2019-03-01	3.8 2019-02-01	→ 0
10Y yield	%	2.41 2019-03-29	2.73 2019-02-28	▼ -0.32
2Y yield	%	2.27 2019-03-29	2.52 2019-02-28	▼ -0.25

China

Indicator	Basis	2019-03	2019-02	Change
CPI (YoY)	% YoY	1.5 2019-03-09	1.7 2019-02-15	▼ -0.2
FX vs USD	px	6.74 2019-03-29	6.69 2019-02-28	→ 0.05
GDP	% YoY	not recorded
PMI (mfg)	index	50.5 2019-03-01	49.2 2019-02-01	▲ 1.3
PMI (svc)	index	54.8 2019-03-31	54.3 2019-02-28	▲ 0.5
Policy rate	% (1Y LPR)	4.31 2019-03-29	4.31 2019-02-28	→ 0
2s10s slope	pp	0.48 2019-03-29	0.57 2019-02-28	▼ -0.09
Unemployment	%	5.2 2019-03-01	5.3 2019-02-01	→ -0.1
10Y yield	%	3.07 2019-03-29	3.17 2019-02-28	▼ -0.1
2Y yield	%	2.59 2019-03-29	2.6 2019-02-28	→ -0.02

Euro area

Indicator	Basis	2019-03	2019-02	Change
CPI (YoY)	% YoY	1.5 2019-03-15	1.4 2019-02-22	→ 0.1
FX vs USD	px	1.12 2019-03-29	1.14 2019-02-28	→ -0.01
GDP	% YoY	0.3 2019-03-15	-1 2019-02-22	▲ 1.3
PMI (mfg)	index	47.6 2019-03-22	49.2 2019-02-21	▼ -1.6
PMI (svc)	index	52.7 2019-03-22	52.3 2019-02-21	▲ 0.4
Policy rate	%	0 2019-03-07	—	—
Unemployment	%	7.8 2019-03-01	—	—
10Y yield	%	0.99 2019-03-01	1.12 2019-02-01	▼ -0.13

Japan

Indicator	Basis	2019-03	2019-02	Change
Core CPI	% YoY	0.3 2019-03-22	0.3 2019-02-22	→ 0
CPI (YoY)	% YoY	0.2 2019-03-22	0.2 2019-02-22	→ 0
FX vs USD	px	110.64 2019-03-29	110.86 2019-02-28	→ -0.23
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	-0.1 2019-03-15	—	—
Unemployment	%	2.3 2019-03-29	2.4 2019-02-01	→ -0.1
10Y yield	%	-0.1 2019-03-01	-0.01 2019-02-01	▼ -0.08

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.

○ 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.

● 1 active

Euro area ⚠ stale

disinflationary stall

contraction · at 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.

● 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.

○ 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

M5Growth acceleration (expansionary PMI)

Trigger: pmi_mfg: 49.2 → 50.5 (+1.3)

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

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

M6Growth slowdown (deepening contraction)

Trigger: pmi_mfg: 49.3 → 47.6 (-1.7)

Manufacturing PMI is below 50 and still falling.
Why: Below 50 means more firms are contracting than expanding; *falling* means the contraction is deepening, not bottoming — that combination is what leads earnings revisions down.
Investors rotate toward defensives and government bonds.
Why: When growth is deteriorating, steady-demand sectors (staples, utilities, healthcare) hold earnings better, and government bonds act as a hedge that rallies if the slowdown deepens further.
Cyclicals, small-caps, EM and industrial commodities underperform.
Why: These are geared to the physical cycle and to leverage, so worsening activity hits their earnings and risk appetite hardest; commodity demand softens with industrial output.

Helps
defensive sectors (staples, utilities, healthcare)long government bondsquality/large-cap

Hurts
cyclicalssmall-capsEM equityindustrial commodities

Caveat: A shallow dip just below 50 that quickly reverses ('soft patch') doesn't trigger the full defensive rotation; the level must persist.

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 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)	1.50	1.88	-0.38 ▼	2019-03-12
Core CPI	0.10	0.15	-0.05 ▬	2019-03-12
Core PCE	1.80	1.62	+0.18 ▲	2019-03-29
Policy rate	2.50	2.50	+0.00 ▬	2019-03-31
GDP	2.20	2.60	-0.40 ▼	2019-03-28
PMI (mfg)	54.20	56.60	-2.40 ▼	2019-03-01
PMI (svc)	59.70	56.70	+3.00 ▲	2019-03-05
Unemployment	3.80	3.80	+0.00 ▬	2019-03-08
10Y yield	2.41	2.39	+0.02 ▬	2019-03-29
2Y yield	2.27	2.23	+0.04 ▬	2019-03-29
2s10s slope	0.14	0.16	-0.02 ▬	2019-03-29
FX vs USD	97.28	97.20	+0.08 ▬	2019-03-29

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.50	1.70	-0.20 ▼	2019-03-09
Policy rate	4.31	4.31	+0.00 ▬	2019-03-29
GDP	6.40	6.50	-0.10 ▬	2019-01-21
PMI (mfg)	50.50	49.20	+1.30 ▲	2019-03-01
PMI (svc)	54.80	54.30	+0.50 ▲	2019-03-31
Unemployment	5.20	5.30	-0.10 ▬	2019-03-01
10Y yield	3.07	3.06	+0.00 ▬	2019-03-29
2Y yield	2.59	2.59	-0.01 ▬	2019-03-29
2s10s slope	0.48	0.47	+0.01 ▬	2019-03-29
FX vs USD	6.74	6.73	+0.01 ▬	2019-03-29

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	1.50	1.50	+0.00 ▬	2019-03-15
Policy rate	0.00	0.00	+0.00 ▬	2019-03-07
GDP	0.30	-1.00	+1.30 ▲	2019-03-15
PMI (mfg)	47.60	49.30	-1.70 ▼	2019-03-22
PMI (svc)	52.70	52.80	-0.10 ▬	2019-03-22
Unemployment	7.80	7.90	-0.10 ▼	2019-03-01
10Y yield	0.99	1.12	-0.13 ▼	2019-03-01 ⚠⚠
FX vs USD	1.12	1.13	-0.00 ▬	2019-03-29

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.20	0.20	+0.00 ▬	2019-03-22
Core CPI	0.30	0.30	+0.00 ▬	2019-03-22
Policy rate	-0.10	-0.10	+0.00 ▬	2019-03-15
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.30	2.50	-0.20 ▼	2019-03-29
10Y yield	-0.10	-0.01	-0.08 ▼	2019-03-01 ⚠⚠
FX vs USD	110.64	110.49	+0.15 ▬	2019-03-29

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.