The outlook for this month’s third-quarter GDP report continues to edge down, based on a set of nowcasts. The Oct. 28 release from the Bureau of Economic Analysis remains on track to report a solid gain in output, but today’s update reflects a mild but ongoing trend of sliding estimates.

The current update indicates growth at 4.6% for the July-through-September quarter, based on the median nowcast of several estimates compiled by CapitalSpectator.com. That’s a strong increase relative to the last several decades, but today’s data continue to highlight a slipping nowcast as the quarter unfolds.

The good news: the current 4.6% estimate is only fractionally below the projected 4.7% gain in the previous update (published Sep. 24). But today’s nowcast also marks the softest number since CapitalSpectator.com began tracking Q3 GDP numbers in mid-August, when our initial estimate was a moderately higher 5.1%.

Weighing on today’s update is the Atlanta Fed’s GDPNow nowcast, which was revised sharply lower to a weak 1.5% increase on Oct. 5. The source of the downside update: lower estimates for personal consumption expenditures, private domestic investment and net exports, the bank reports.

For the moment, the GDPNow data appears to be an outlier and so its warning should be viewed cautiously – at least until/if the other nowcasts confirm the sharp decline for Q3 in the days ahead.

Regardless, another round of downside revision for Q3 GDP data are likely in the final weeks leading up to the Oct. 28 release from the government. New survey data hints at this possibility, based on IHS Markit’s US Composite PMI, a GDP proxy.

“New business increased further during September, but the rate of expansion eased to the slowest in nine months,” IHS Markit advises in yesterday’s release (Oct. 5). Factors weighing on last month’s macro profile include labor shortages and elevated inflationary pressures, the consultancy explains.

But all this pales next to the potential for a large economic shock if Congress doesn’t raise the debt ceiling. Treasury Secretary Janet Yellen yesterday warned that a failure to lift the government’s borrowing ability by Oct. 18 would trigger a default on US Treasuries, which in turn raised the risk of economic contraction shortly thereafter.

“I do regard Oct. 18 as a deadline,” Yellen told CNBC on Tuesday. “It would be catastrophic to not pay the government’s bills, for us to be in a position where we lacked the resources to pay the government’s bills. I fully expect it would cause a recession as well.”

Republicans and Democrats remain at odds on how to resolve the debt-ceiling issue. Political analysts are predicting that one side or the other will blink and a crisis will be averted. But time is growing short. Political risk, in other words, is currently the biggest threat by far to the economic outlook.

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