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Perhaps US business is not cowering in fear of the fiscal cliff after all

One of the best gauges of future US business spending showed surprising signs of life in October. The data came from the latest report on durable goods—big ticket, manufactured products, like refrigerators and TVs, expected to endure for three years or more. The top line results of that report showed durable goods flat due to declining aircraft results. Not great, but better than expectations from Wall Street economists, who forecast a decline.

The more important numbers are the so-called core capital goods figures, which strip out defense orders and aircraft deals, two major sectors that can mask the real trend in the rest of the economy. New orders for nondefense capital goods, excluding aircraft, jumped 1.7% in October from the prior month; economists had expected a 0.5% decline in that number. This key gauge had been on a downward trend for months that had some economists talking about the possibility of recession. So the rebound is a relief. Jim O’Sullivan, chief economist at High Frequency Economics, sums the numbers up thusly:

In short, better than expected, particularly the key core capex orders series, although that series still shows significant net weakening in the last five months. On the surface, the net weakening suggests sharply lower business confidence, perhaps related to fiscal-cliff uncertainty, yet businesses have not been slashing staffing. We believe weakness in the capex data has at least been exaggerated.

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