Economy slowed by lagged impact of monetary policy, but recession still ways off

Investing.com -- The trend of disinflation remains intact and the economy is growing, albeit at a slower pace, driven by the lagged impact of monetary policy, suggesting a recession isn't on the horizon just yet, analysts at Evercore ISI in a recent note, citing its survey results. 

EVRISI company surveys, which reflect both volumes and prices, ticked down to 47.6 this week, versus 60.8 a couple of years ago, the analysts said. 

"Recession readings start around 45.0. So we’re not there," they said, though slowing growth and inflation, as the EVRISI’s proprietary survey of state sales tax receipts "continued to trend lower in July."

The lagged impact of monetary policy, which is driving the slowdown is likely to continue, Evercore ISI said, pointing to bank and loan deposit rate still around 2%; credit card rates over 20% and unprecedented quantitative tightening seen in the U.S./Eurozone last week. 

But so far the slew of upward U.S. S&P earnings revisions from analysts suggest the economy is "pretty strong," they added.

Last week, The Q2 consensus for S&P earnings moved up to $243, about 10% higher from the same period a year earlier. 

There were, however, an "unusual number of cracks" in the news last week including Cisco (NASDAQ:CSCO) announcement of lay offs, Warner Bros Discovery (NASDAQ:WBD) deteriorating television business, and Expedia (NASDAQ:EXPE)'s warning of tapering travel among others. 

On the global inflation front, China, the world’s second-largest economy was "still exporting disinflation in July," they said, pointing to softer inflation data from China. 

China’s price producer index declined month on month and year over year in July, while China’s core CPI was 0.0% month on month and just 0.4% higher year-on-year.