The unsettled question of the looming fiscal cliff really seems to be putting a damper on US business spending. An update on one of the best gauges of business capital expenditures (capex) is the just-released—and snappily named—”new orders for non-defense capital goods excluding aircraft” (in other words, anything from heavy machinery to computer and communications equipment) which were completely flat from August to September. What’s worse, the growth in new orders from July to August, previously reported as 1.1%, has since been revised to 0.2%. And shipments of such business equipment in September fell 0.3%.
“The weakening in capex remains somewhat of a mystery. Fiscal cliff concerns may be an issue, but capex has been softening globally, which is at odds with a completely US-centric story,” wrote JP Morgan economists. “The global growth slowdown is probably another important contributing factor. Whatever the reason, so far we have not seen the caution in business spending being reflected in the employment data; a comforting development but one we will need to see continue if the economy is going to maintain positive growth momentum.” On that note, Bloomberg reports that firings seem to be picking up steam. Not good.