Today’s GI regime is Growth Acceleration × Inflation Reacceleration.
Financial conditions are tight, the yield curve is flat, and credit conditions show spread compression.
- The GI regime suggests a continuation of growth acceleration and inflation reacceleration, with no change from the past.
- Financial conditions have moved slightly tighter, with a higher score compared to the past.
- The yield curve remains flat, with a slight steepening observed since the last snapshot.
- Credit conditions indicate spread compression, with a lower z-score and percentile compared to the past.
- The most notable shift is the slight steepening of the yield curve, reflecting changes in the 10-year yield.
Growth × Inflation (GI)
The current Growth Acceleration × Inflation Reacceleration regime indicates a period where both economic growth and inflation are picking up pace. The year-over-year growth in industrial production stands at 1.75%, with a three-month change of 1.12%, suggesting a robust growth environment. Inflation, as measured by the CPI, is at 3.03% year-over-year, with a three-month change of 0.12%, indicating a reacceleration in price levels.
There has been no change in the GI regime compared to the past snapshot, maintaining the same growth and inflation dynamics. This consistency suggests a stable environment where both growth and inflation are on an upward trajectory.
Financial Conditions (F)
The financial conditions are currently labeled as tight, with a score of 0.89. This indicates that financial conditions are more restrictive compared to typical levels over the past decade. The federal funds rate is at 4.09%, and the 2-year yield is at 3.52%, providing context for the tight conditions.
Compared to the past, financial conditions have moved somewhat tighter, as indicated by the increase in the score from 0.87. This tightening reflects a slight increase in the 2-year yield, suggesting a more cautious financial environment.
Yield Curve (R)
The yield curve is currently flat, with a spread of 0.29 percentage points between the 10-year and 3-month yields. This flat shape suggests a neutral stance in terms of future economic expectations, neither strongly favoring growth nor recession.
Compared to the past, the yield curve has steepened slightly, as the spread has increased from 0.18 percentage points. This change is primarily due to an increase in the 10-year yield, which may reflect shifting market expectations about future growth and inflation.
Credit (C)
Credit conditions are characterized by spread compression, with a high-yield spread level of 2.88. The z-score is -1.06, indicating that spreads are significantly tighter than the long-run average. The percentile rank of 4.92 places current conditions among the tightest observed over the past decade.
Since the last snapshot, credit conditions have shown further compression, with a lower z-score and percentile. This suggests a continued tightening in credit spreads, reflecting a more favorable credit environment for borrowers.
Uncertainty and How to Verify Going Forward
This report outlines conditional tendencies based on current data, not forecasts. Key metrics to track include the GI label and core values, the financial-conditions score, the yield-curve spread, and the high-yield spread level and percentile. Monitoring these indicators over the coming months will provide insights into potential shifts in economic and financial conditions.
Readers should remain vigilant in observing these metrics to understand the evolving macroeconomic landscape. This report does not constitute investment advice, and readers are responsible for their own investment decisions.
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