With less than three weeks before the government publishes its preliminary estimate of second quarter economic data, revised nowcasts have trimmed expectations for US output. Today’s estimate calls for a substantial slowdown in Q2 growth, based on a set of projections compiled by The Capital Spectator. The downgrade for the GDP nowcast comes at a time of concern that recession risk, for the US and the global economy, is rising.

Economic activity for the US is on track to expand by a sluggish 1.7% in Q2, according to the median for a set of nowcasts. The projection marks a conspicuous drop from the 2.0% gain in the previous nowcast update for Q2 (June 25). The slide is all the more notable because it follows a period of stable median GDP projections for the current quarter. Although today’s estimate still shows that the US will skirt a recession in the April-through-June period, the deceleration in growth following Q1’s strong 3.1% gain raises a warning flag for this year’s second half and beyond.

Nonetheless, there’s still a case for expecting that US output will remain strong enough to avoid an NBER-defined recession, based on numbers published to date. As noted in the June business-cycle profile (and reaffirmed in this week’s edition of The US Business Cycle Risk Report), the recent slowdown appears to be stabilizing. The only difference now is that the stabilization is on track to settle at a pace that’s weaker than previously estimated.

If today’s median estimate is accurate, Q2 GDP growth is set to weaken the most since 2015’s third quarter — the last time that elevated recession fears stalked the macro landscape for the US. It turned out to be a false alarm then and that’s still the likely outcome, based on a broad range of data published to date.

But there are also reasons that suggest otherwise. One high-profile indicator that’s fueling concern is the ongoing inverted yield curve for 10-year less 3-month Treasuries. This spread has been negative (10-year below 3-month rate) since late-May — a warning that’s widely considered a harbinger of an upcoming recession.

Yet the 10-year/2-year gap is still modestly positive, suggesting that the Treasury market’s economic outlook remains mixed.

Although the outlook is cloudy and growth expectations have taken a hit, it’s still premature to assume that a new recession is fate. A partial or full resolution to the US-China trade war in the weeks ahead could lift economic activity. Meantime, Fed funds futures are pricing in a near certainty that the Federal Reserve will cut interest rates later this month, at the July 26 FOMC meeting. Easier monetary policy may provide a modest boost to growth.

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Nonetheless, the decelerating macro trend is conspicuous. In line with recent projections, the one-year GDP growth trend for the US is still on track for a gradual slide, based on The Capital Spectator’s average point estimates via a set of combination forecasts. Today’s revised point forecast advises that the year-over-year rate of growth will ease for several quarters going forward. The good news: the near-term outlook still anticipates that growth will remain strong enough to keep recession risk low. But if this turns out to be overly optimistic and the one-year GDP growth rate falls closer to 1%, the outlook will turn considerably darker.

Meantime, the crowd is on alert for additional slow-growth warnings. The US expansion, set to become the longest on record at the end of this month, will likely roll on for the near term. But the recent downshift has raised the stakes for incoming data and so a new round of downside surprises on key indicators could deliver a significant attitude adjustment in the weeks ahead.

For now, Wall Street is banking on support from the Federal Reserve, an expectation that will be tested in Fed Chairman Jerome Powell’s testimony to Congress today and tomorrow. on Wednesday and Thursday.

“Powell has made it clear that, if necessary, the Fed will take steps to assure the continuation of the expansion,’’ says Ward McCarthy, chief financial economist at Jefferies. “What is not clear is what would trigger the Fed take these steps. I am looking for him to provide some clarity.’’

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