Macro Intelligence · Weekly · deep read

Macro Regime — 2025-W32

→

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

Read at: thesis narrative mechanism data

↩ Home Macro index ← 2025-08 board

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

Standing macro backdropBORROWED

Borrowed from its month (2025-08); the weekly reads the standing object, it does not recompute the aggregate.

United States: disinflationary stall
China: deflation watch
Euro area: stall-speed, at target
Japan: overheating / late-cycle

month aggregated actuals

United States

Indicator	Basis	2025-08	2025-07	Change
Core CPI	% MoM	0.31 2025-08-01	0.31 2025-07-01	→ 0
Core PCE	% YoY	2.91 2025-08-01	2.86 2025-07-01	→ 0.05
CPI (YoY)	% YoY	2.94 2025-08-01	2.74 2025-07-01	▲ 0.2
FX vs USD	px	97.77 2025-08-29	100.03 2025-07-31	▼ -2.26
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	48 2025-08-01	49 2025-07-01	▼ -1
PMI (svc)	index	50.1 2025-08-05	50.8 2025-07-03	▼ -0.7
Policy rate	%	4.5 2025-08-31	4.5 2025-07-31	→ 0
2s10s slope	pp	0.64 2025-08-29	0.43 2025-07-31	▲ 0.21
Unemployment	%	4.3 2025-08-01	4.3 2025-07-01	→ 0
10Y yield	%	4.23 2025-08-29	4.37 2025-07-31	▼ -0.14
2Y yield	%	3.59 2025-08-29	3.94 2025-07-31	▼ -0.35

China

Indicator	Basis	2025-08	2025-07	Change
CPI (YoY)	% YoY	0 2025-08-09	0.1 2025-07-09	→ -0.1
FX vs USD	px	7.15 2025-08-29	7.18 2025-07-31	→ -0.02
GDP	% YoY	not recorded
PMI (mfg)	index	49.4 2025-08-01	49.3 2025-07-01	→ 0.1
PMI (svc)	index	50.3 2025-08-31	50.1 2025-07-31	→ 0.2
Policy rate	% (1Y LPR)	3 2025-08-20	3 2025-07-21	→ 0
2s10s slope	pp	0.43 2025-08-29	0.28 2025-07-31	▲ 0.15
Unemployment	%	5.3 2025-08-01	5.2 2025-07-01	→ 0.1
10Y yield	%	1.84 2025-08-29	1.7 2025-07-31	▲ 0.13
2Y yield	%	1.4 2025-08-29	1.42 2025-07-31	→ -0.02

Euro area

Indicator	Basis	2025-08	2025-07	Change
CPI (YoY)	% YoY	2 2025-08-20	2 2025-07-17	→ 0
FX vs USD	px	1.17 2025-08-29	1.14 2025-07-31	→ 0.03
GDP	% YoY	0 2025-08-20	0.3 2025-07-17	▼ -0.3
PMI (mfg)	index	50.5 2025-08-21	49.8 2025-07-24	▲ 0.7
PMI (svc)	index	50.7 2025-08-21	51.2 2025-07-24	▼ -0.5
Policy rate	%	not recorded
Unemployment	%	not recorded
10Y yield	%	3.21 2025-08-01	3.17 2025-07-01	→ 0.03

Japan

Indicator	Basis	2025-08	2025-07	Change
Core CPI	% YoY	1.6 2025-08-22	1.6 2025-07-18	→ 0
CPI (YoY)	% YoY	3.1 2025-08-22	3.3 2025-07-18	▼ -0.2
FX vs USD	px	146.79 2025-08-29	149.23 2025-07-31	▼ -2.44
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	not recorded
Unemployment	%	2.3 2025-08-29	—	—
10Y yield	%	1.6 2025-08-01	1.54 2025-07-01	▲ 0.06

ThesisL0

(historical week — no Claude narration run)

Standing pictureL1

United States

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.

● 1 active

China

deflation watch

stall · 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

Euro area ⚠ stale

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

Japan ⚠ stale

overheating / late-cycle

unknown · above target · on hold

○ no change

Mechanisms & channelsL2

United States

M6Growth slowdown (deepening contraction)

Trigger: pmi_mfg: 49 → 48 (-1)

Manufacturing PMIPMI — Purchasing Managers' Index. Above 50 = the sector is expanding vs last month; below 50 = contracting. A timely read on activity. 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 defensivesdefensives — Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows. 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.
Cyclicalscyclicals — Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary., 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

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)	2.94	2.70	+0.24 ▲	2025-08-01
Core CPI	0.31	0.20	+0.11 ▲	2025-08-01
Core PCE	2.91	2.80	+0.11 ▲	2025-08-01
Policy rate	4.50	4.50	+0.00 ▬	2025-08-10
GDP	3.00	4.40	-1.40 ▼	2025-07-30
PMI (mfg)	48.00	49.00	-1.00 ▼	2025-08-01
PMI (svc)	50.10	50.80	-0.70 ▼	2025-08-05
Unemployment	4.30	4.10	+0.20 ▲	2025-08-01
10Y yield	4.27	4.23	+0.04 ▬	2025-08-08
2Y yield	3.76	3.72	+0.04 ▬	2025-08-08
2s10s slope	0.51	0.51	+0.00 ▬	2025-08-08
FX vs USD	98.18	98.40	-0.22 ▬	2025-08-08

China

Indicator	Current	Prior	Δ	As of
CPI (YoY)	0.00	0.10	-0.10 ▬	2025-08-09
Policy rate	3.00	3.00	+0.00 ▬	2025-07-21
GDP	5.20	5.40	-0.20 ▼	2025-07-15
PMI (mfg)	49.40	49.30	+0.10 ▬	2025-08-01
PMI (svc)	50.10	50.50	-0.40 ▼	2025-07-31
Unemployment	5.30	5.20	+0.10 ▬	2025-08-01
10Y yield	1.69	1.69	-0.00 ▬	2025-08-08
2Y yield	1.40	1.41	-0.01 ▬	2025-08-08
2s10s slope	0.29	0.28	+0.01 ▬	2025-08-08
FX vs USD	7.18	7.18	-0.00 ▬	2025-08-08

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.00	2.00	+0.00 ▬	2025-08-01
Policy rate	2.15	2.15	+0.00 ▬	2025-07-24
GDP	0.00	0.30	-0.30 ▼	2025-08-01
PMI (mfg)	49.80	49.80	+0.00 ▬	2025-08-01
PMI (svc)	51.00	51.20	-0.20 ▬	2025-08-05
Unemployment	6.20	6.30	-0.10 ▬	2025-07-31
10Y yield	3.21	3.17	+0.03 ▬	2025-08-01 ⚠
FX vs USD	1.17	1.17	+0.00 ▬	2025-08-08

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	3.30	3.50	-0.20 ▼	2025-07-18
Core CPI	1.60	1.60	+0.00 ▬	2025-07-18
Policy rate	0.50	0.50	+0.00 ▬	2025-07-31
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.50	2.50	+0.00 ▬	2025-08-01
10Y yield	1.60	1.54	+0.06 ▲	2025-08-01 ⚠
FX vs USD	146.84	147.19	-0.36 ▬	2025-08-08

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.