New York, Aug. 15: Like a car spinning its wheels, the American economy hasn’t been getting much traction. Many financial indicators are issuing worrisome signals, millions of people are still out of work, and growth is slowing.

Will the economy pick up momentum or slip back into recession? Unfortunately, the answer is very much in doubt.

“We are at a very critical moment in the business cycle,” said Mr Lakshman Achuthan, the managing director of the Economic Cycle Research Institute, a private forecasting group with an excellent track record. After the economy began to recover last summer, in his estimation, “growth has definitely slowed.” But he said he wouldn’t have enough data until at least the fall to know “whether we’re dipping back into recession.”

Even the Federal Reserve chairman, Mr Ben S. Bernanke, calls the current economic outlook “unusually uncertain.” And the financial markets have certainly noticed.

“The market is favouring investments thought to have no risk, like Treasuries, as opposed to assets with risk, like stocks — and that’s been becoming more and more pronounced,” said Mr William H. Gross, co-chief investment officer of the Pacific Investment Management Company, or Pimco, the big bond manager.

In the bond market last week, safety-seeking investors bid up the prices of Treasury securities, driving down yields to extraordinarily low levels along a broad range of maturities — and extending the astonishing rally of long-term Treasury bonds, which continue to outperform the stock market and nearly every other asset class.

The stock market was particularly shaky last week. On Wednesday, the Dow Jones industrial average dropped 265.42 points, or 2.5 per cent, its biggest decline since June. For the week, the Dow lost more than 350 points, or 3.3 per cent, closing at 10,303.15, while the S&P fell more than 42 points, or 3.8 per cent, to 1,079.25.

The Fed acknowledged as much last week. In a statement on Tuesday, its Open Market Committee said that the recovery pace had “slowed” and that growth “is likely to be more modest in the near term than had been anticipated.”

It’s too early to know whether the economy will tip into an actual decline, Mr Achuthan said.

Mr Gross of Pimco put the probability of a recession — and of an accompanying bout of deflation — at 25 to 35 per cent.

Still, the economic signs are ambiguous. After falling in the spring, industrial commodity prices have risen, suggesting that there is still surging demand from manufacturers.

What’s been lacking is broad consumer demand, a revival of the housing market and sufficient business confidence in large-scale hiring. And, of course, there are deep structural economic problems — the highest ratio of public debt to gross domestic product since World War II, for example — that will need to be dealt with over many years.

Nonetheless, if there is good news in the fall — if it becomes clear that the pace of recovery has begun to ac-celerate — there could easily be another burst of stock market exuberance, Mr Ac-huthan said. “Interest rates are very low,” he said, “and if you were to combine that with economic growth, you have got a wonderful recipe for profits.”