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Evercore ISI analyst Ed Hyman argues that decades-high inflation has likely peaked. The evidence, including the less-than-expected increase in AHEs in May, shows that inflation has likely peaked in May.
Inventories are going up as sales are likely to slow down. Moreover, lumber prices have been cut in half, Hyman notes.
Evercore ISI expects core PCE to have increased by +0.3% in May.
“Money growth has slowed from +27% y/y less than two years ago to +6%. Global growth is slowing significantly. And the Fed is tightening,” Hyman told clients in a note.
“The economy is slowing, but 2Q is coming in a touch stronger than we expected. Consumer spending was strong in Apr, and employment was strong in Apr and May. EVRISI company surveys held at an elevated level this week, and unemployment claims remained low.”
Moreover, the analyst sees the S&P earnings surprising to the upside in Q2.
“However, in response to signs of economic strength this week, bond yields surged +20bp, which meant good news for the economy, bad news for the stock market. The consensus is that the economy is indeed strong now, but that it will enter recession fairly soon,” Hyman concluded.
