You Might Not Appreciate How Significant Today’s Huge Durable Goods Number Is For The Economy

The public gets fascinated by the monthly jobs report, but for our money, right now, you can’t do better than the Durable Goods and Personal Spending numbers that came out today, in terms of getting a feel for what’s going on with the economy. Everyone knows what Personal Spending is, but Durable Goods are less known: They’re the products that people buy that last for a very long time. Many of those products are business purchases of machinery and equipment.

The reason is that both of these numbers should conceivably be in trouble if a pre-Fiscal Cliff paralysis is settling into the economy. Indeed, one of the most common economic refrains is that the Fiscal Cliff has already hit the economy (regardless of whether we “go over it” or not).

For the last couple of months, people have been talking about the capital expenditure slowdown as proof of this.

But today’s number blow this fear out of the water.

Here’s a chart of Capital Goods Orders Excluding defence and Aircraft/Parts. The idea is it strips the number down to real, normal, non-lumpy business investment. If there were a cliff paralysis in place, this number would be fading. And indeed analysts had expected growth of 0%. Instead it rose 2.7%.

Couple that with the strong personal spending report, and you’ll soon realise that one of the biggest fiscal cliff fears is getting destroyed.