"Disconnect" is a noun here. "Developing" is a present participle. It's a reduced relative clause, short for "which is developing..".

There is a disconnection developing between “survey” data and data on actual economic activity. used as a noun "developing" is used as a verb I hope this helps. Good luck! :D

Thank you, Ed! Surely, that helps!

Like Bernadette said, in modern usage "disconnect" can be a noun or a verb. Verb - Disconnect your flash drive before shutting down the computer. Noun - He didn't understand me. There must have been a disconnect. "Developing" can be a verb or an adjective. Verb - I'm developing a new strategy to win at chess. Adjective - This developing country has very few power plants. I hope that helps in developing your English grammar. Let me know if there's a disconnect.

Thank you, Bernadette! This helps.