Macro Intelligence · Weekly · deep read

Macro Regime — 2025-W36

→

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

Read at: thesis narrative mechanism data

↩ Home Macro index ← 2025-09 board

Standing macro backdropBORROWED

Borrowed from its month (2025-09); the weekly reads the standing object, it does not recompute the aggregate.

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

month aggregated actuals

United States

Indicator	Basis	2025-09	2025-08	Change
Core CPI	% MoM	0.22 2025-09-01	0.31 2025-08-01	→ -0.09
Core PCE	% YoY	2.83 2025-09-01	2.91 2025-08-01	→ -0.08
CPI (YoY)	% YoY	3.02 2025-09-01	2.94 2025-08-01	→ 0.08
FX vs USD	px	97.77 2025-09-30	97.77 2025-08-29	→ 0
GDP	% QoQ ann.	not recorded
PMI (mfg)	index	48.7 2025-09-02	48 2025-08-01	▲ 0.7
PMI (svc)	index	52 2025-09-04	50.1 2025-08-05	▲ 1.9
Policy rate	%	4.25 2025-09-30	4.5 2025-08-31	▼ -0.25
2s10s slope	pp	0.56 2025-09-30	0.64 2025-08-29	▼ -0.08
Unemployment	%	4.4 2025-09-01	4.3 2025-08-01	→ 0.1
10Y yield	%	4.16 2025-09-30	4.23 2025-08-29	▼ -0.07
2Y yield	%	3.6 2025-09-30	3.59 2025-08-29	→ 0.01

China

Indicator	Basis	2025-09	2025-08	Change
CPI (YoY)	% YoY	not recorded
FX vs USD	px	7.12 2025-09-30	7.15 2025-08-29	→ -0.03
GDP	% YoY	not recorded
PMI (mfg)	index	49.8 2025-09-01	49.4 2025-08-01	▲ 0.4
PMI (svc)	index	not recorded
Policy rate	% (1Y LPR)	3 2025-09-22	3 2025-08-20	→ 0
2s10s slope	pp	0.37 2025-09-30	0.43 2025-08-29	▼ -0.07
Unemployment	%	5.2 2025-09-01	5.3 2025-08-01	→ -0.1
10Y yield	%	1.86 2025-09-30	1.84 2025-08-29	→ 0.02
2Y yield	%	1.49 2025-09-30	1.4 2025-08-29	▲ 0.09

Euro area

Indicator	Basis	2025-09	2025-08	Change
CPI (YoY)	% YoY	2.1 2025-09-02	2 2025-08-20	→ 0.1
FX vs USD	px	1.17 2025-09-30	1.17 2025-08-29	→ 0.01
GDP	% YoY	0.2 2025-09-02	0 2025-08-20	→ 0.2
PMI (mfg)	index	50.7 2025-09-01	50.5 2025-08-21	→ 0.2
PMI (svc)	index	50.5 2025-09-03	50.7 2025-08-21	→ -0.2
Policy rate	%	not recorded
Unemployment	%	6.2 2025-09-01	—	—
10Y yield	%	3.23 2025-09-01	3.21 2025-08-01	→ 0.03

Japan

Indicator	Basis	2025-09	2025-08	Change
Core CPI	% YoY	1.6 2025-09-19	1.6 2025-08-22	→ 0
CPI (YoY)	% YoY	2.7 2025-09-19	3.1 2025-08-22	▼ -0.4
FX vs USD	px	148.6 2025-09-30	146.79 2025-08-29	▲ 1.8
GDP	% YoY	not recorded
PMI (mfg)		not recorded
Policy rate	%	not recorded
Unemployment	%	not recorded
10Y yield	%	1.65 2025-09-01	1.6 2025-08-01	→ 0.04

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.

● 1 active

Euro area

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

overheating / late-cycle

unknown · above target · on hold

○ no change

Mechanisms & channelsL2

United States

M13Contraction easing (sub-50 PMI, rising)

Trigger: pmi_mfg: 48 → 48.7 (+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 below 50 but rising.
Why: Activity is still contracting in absolute terms (below 50), but the rate of contraction is easing — the second derivative has turned up, which historically clusters near cyclical lows.
Forward-looking investors start to price the trough.
Why: Markets discount the turn before it completes; an improving-but-sub-50 PMI often coincides with the low in cyclical risk assets, well before the PMI itself crosses back above 50.
Early-cycle cyclicalscyclicals — Sectors whose earnings rise and fall with the economic cycle — industrials, materials, energy, consumer discretionary. and small-caps tend to lead off the low; defensivesdefensives — Sectors whose demand is steady through the cycle — consumer staples, utilities, healthcare. They outperform when growth slows.' relative edge fades.
Why: The names most beaten down in the contraction have the most operating leverage to even a marginal improvement, so they re-rate first when the deterioration stops.

Helps
early-cycle cyclicalssmall-capsEM equity

Hurts
defensives (relative)long government bonds (if the recovery firms)

Caveat: A one-month uptick that doesn't persist is a head-fake; the turn needs follow-through, and a sub-50 level still means activity is contracting in absolute terms — this is an inflection signal, not an all-clear.

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

M13Contraction easing (sub-50 PMI, rising)

Trigger: pmi_mfg: 49.4 → 49.8 (+0.4)

Manufacturing PMI is below 50 but rising.
Why: Activity is still contracting in absolute terms (below 50), but the rate of contraction is easing — the second derivative has turned up, which historically clusters near cyclical lows.
Forward-looking investors start to price the trough.
Why: Markets discount the turn before it completes; an improving-but-sub-50 PMI often coincides with the low in cyclical risk assets, well before the PMI itself crosses back above 50.
Early-cycle cyclicals and small-caps tend to lead off the low; defensives' relative edge fades.
Why: The names most beaten down in the contraction have the most operating leverage to even a marginal improvement, so they re-rate first when the deterioration stops.

Helps
early-cycle cyclicalssmall-capsEM equity

Hurts
defensives (relative)long government bonds (if the recovery firms)

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.

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)	3.02	2.70	+0.32 ▲	2025-09-01
Core CPI	0.22	0.30	-0.08 ▬	2025-09-01
Core PCE	2.83	2.90	-0.07 ▬	2025-09-01
Policy rate	4.50	4.50	+0.00 ▬	2025-09-07
GDP	3.30	3.00	+0.30 ▲	2025-08-28
PMI (mfg)	48.70	48.00	+0.70 ▲	2025-09-02
PMI (svc)	52.00	50.10	+1.90 ▲	2025-09-04
Unemployment	4.40	4.30	+0.10 ▲	2025-09-01
10Y yield	4.10	4.17	-0.07 ▼	2025-09-05
2Y yield	3.51	3.59	-0.08 ▼	2025-09-05
2s10s slope	0.59	0.58	+0.01 ▬	2025-09-05
FX vs USD	97.77	98.35	-0.58 ▼	2025-09-05

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 ▬	2025-08-20
GDP	5.20	5.40	-0.20 ▼	2025-07-15
PMI (mfg)	49.80	49.40	+0.40 ▲	2025-09-01
PMI (svc)	50.30	50.10	+0.20 ▬	2025-08-31
Unemployment	5.20	5.30	-0.10 ▬	2025-09-01
10Y yield	1.83	1.81	+0.02 ▬	2025-09-05
2Y yield	1.41	1.40	+0.00 ▬	2025-09-05
2s10s slope	0.42	0.40	+0.02 ▬	2025-09-05
FX vs USD	7.14	7.14	+0.00 ▬	2025-09-05

Euro area

Indicator	Current	Prior	Δ	As of
CPI (YoY)	2.10	2.00	+0.10 ▲	2025-09-02
Policy rate	2.15	2.15	+0.00 ▬	2025-07-24
GDP	0.20	0.00	+0.20 ▬	2025-09-02
PMI (mfg)	50.70	50.50	+0.20 ▬	2025-09-01
PMI (svc)	50.50	50.70	-0.20 ▬	2025-09-03
Unemployment	6.20	6.20	+0.00 ▬	2025-09-01
10Y yield	3.23	3.21	+0.03 ▬	2025-09-01
FX vs USD	1.17	1.17	-0.00 ▬	2025-09-05

Japan

Indicator	Current	Prior	Δ	As of
CPI (YoY)	3.10	3.30	-0.20 ▼	2025-08-22
Core CPI	1.60	1.60	+0.00 ▬	2025-08-22
Policy rate	0.50	0.50	+0.00 ▬	2025-07-31
GDP	n/a
PMI (mfg)	n/a
Unemployment	2.30	2.50	-0.20 ▼	2025-08-29
10Y yield	1.65	1.60	+0.04 ▬	2025-09-01
FX vs USD	148.38	147.98	+0.40 ▬	2025-09-05

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.