The U.S. economy is displaying undeniable signs of deceleration in the third quarter, even as massive government stimulus continues to flow into the markets. The long-predicted recession seems increasingly imminent, with economic camouflage beginning to wear thin. A significant revision in unemployment figures is expected, potentially revealing up to one million more jobless individuals than previously reported.

This situation underscores the growing pressure on the Federal Reserve to reconsider its monetary policy. A pivot towards lowering interest rates could soon be on the horizon, often signaling the onset of a market downturn. Investors are advised to approach with caution.

Recent data from Bankinter highlights a worsening Leading Indicator, which fell by 0.6% in July on a month-on-month basis, marking the lowest level since November 2016. Year-on-year, the indicator dropped by 5.2%, breaking the modest recovery trend of the last six months.

Despite this, certain components showed unexpected resilience: Consumer Orders rose slightly by 0.1%, and Unemployment Claims moderated by 0.2%. However, other areas such as Average Hours Worked and Building Permits exhibited notable declines, with the latter plummeting by 4% month-on-month.

Bankinter’s analysis team expressed concern over these developments, noting that the leading indicator remains at historically low levels. This contrasts with relatively positive Retail Sales data, which saw a 1% increase month-on-month. Meanwhile, housing market data remains weak.

In a statement, Mary Daly of the San Francisco Fed suggested that the economy is not on the brink of a sharp downturn, hinting at a potential gradual tapering of monetary policy starting in September. All eyes are now on Federal Reserve Chair Jerome Powell, who is expected to provide further insights during his upcoming speech at Jackson Hole.