The recent slowdown in the outlook for third-quarter growth deepened recently, based on a set of nowcasts. The Oct. 28 release from the Bureau of Economic Analysis is still on track to post a moderate gain, but today’s update for the nowcast reflects a steep downgrade from the previous estimate.

The current estimate indicates growth at 3.0% for the July-through-September quarter, based on the median of several numbers compiled by CapitalSpectator.com. That’s a solid increase in terms of historical comparison, but the downgrade raises warning signs.

For starters, the revised 3.0% nowcast marks a sharp decline from the 4.6% estimate published earlier in the month. Updates for Q3 economic activity have been easing all along, but the latest slide marks a dramatic decrease relative to the mild declines that prevailed previously. The current 3.0% median estimate for Q3 is also less than half the 6.7% increase reported for Q2.

One of the inputs used to calculate the median in the chart above turned sharply lower this week. The Atlanta Fed’s GDPNow model slumped to a worrisome 0.5% increase in the Oct. 19 revision. Catalysts for the decline included downturns in “nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real gross private domestic investment growth,” the bank reports.

It’s been clear for some time that the US economic rebound has peaked. {{|Goldman Sachs}} chief economist Jan Hatzius this week advised that “growth is clearly slowing. Obviously we are past the peak [growth] rate, but it’s a relatively gradual slowdown.”

On a relatively positive note, CapitalSpectator.com’s Macro Trend Index, which tracks the strength of the directional bias for US economic activity in real time, turned up recently. That’s a clue for thinking that the downside bias has eased/stabilized.

Nonetheless, it’s clear that the macro trend has decelerated. Some of the more pessimistic readings of the economy see a recession lurking in the near term, if it hasn’t already started. But that’s premature. As reported in this week’s issue of The US Business Cycle Risk Report, a broad set of indicators continue to reflect low recession risk at the moment, based on reported data to date.

What is clear is that the robust growth signals from the spring and summer have faded, perhaps sharply. As a result, macro risk for the fourth quarter and early 2022 has increased. Exactly how much risk has increased is debatable, but for now there’s a stronger case for managing expectations down.