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 Growth Acceleration × Inflation Reacceleration regime has historically tended to indicate robust economic activity with rising price pressures.
- Financial conditions remain tight, with a slight increase in the score, suggesting a marginally tighter environment compared to last week.
- The yield curve is flat, with a slight steepening observed, which has often been associated with mixed economic signals.
- Credit conditions show spread compression, with a low z-score and percentile, indicating relatively favorable borrowing conditions.
- The most notable shift from the past is the slight steepening of the yield curve spread.
Growth × Inflation (GI)
The current regime of Growth Acceleration × Inflation Reacceleration suggests a period where economic growth is picking up pace alongside rising inflationary pressures. The year-over-year growth in industrial production stands at 1.75%, with a three-month change of 1.12%, indicating a robust growth trajectory. On the inflation front, the consumer price index shows a year-over-year increase of 3.03%, with a three-month change of 0.12%, pointing to persistent inflationary pressures. There is no change in the regime compared to the past snapshot, maintaining the same growth and inflation dynamics.
Financial Conditions (F)
Financial conditions are currently labeled as tight, which implies a more restrictive environment compared to the typical levels observed over the past decade. The federal funds rate is at 4.09%, and the two-year yield is at 3.57%, providing context for the tight conditions. The financial conditions score has moved slightly tighter compared to the past, increasing from 0.89 to 0.90. This suggests a marginal tightening in the financial environment over the past week.
Yield Curve (R)
The yield curve is currently flat, with a spread of 0.35 percentage points between the 10-year and 3-month yields. This flat shape can often signal uncertainty about future economic growth. Compared to the past, the yield curve has steepened slightly, moving from a spread of 0.27 percentage points. This change may reflect shifting market expectations about future economic conditions, although it remains within a flat configuration.
Credit (C)
Credit conditions are characterized by spread compression, with a high-yield spread level of 2.89%. The z-score of -1.05 indicates that the current spread is below the long-run mean, and the 5.42 percentile suggests that spreads are relatively tight compared to the past decade. Compared to the past, there has been a slight compression in spreads, moving from a level of 2.94. This environment typically supports favorable borrowing conditions.
Uncertainty and How to Verify Going Forward
This report outlines conditional tendencies rather than forecasts. Key metrics to track include the GI label of Growth Acceleration × Inflation Reacceleration, the financial-conditions score of 0.90, the yield-curve spread of 0.35 percentage points, and the high-yield spread level of 2.89 at the 5.42 percentile. Monitoring these indicators over the coming months can provide insights into potential shifts in economic conditions. Readers should note that this analysis does not constitute investment advice, and responsibility for investment decisions rests solely with the individual.
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