Businesses are developing a split personality. The slump in capital goods orders suggests that businesses are increasingly concerned about the looming fiscal cliff and/or the global economic slowdown, whereas the pick-up in private sector employment growth indicates that businesses are becoming less cautious. Our analysis suggests that the investment/employment split reflects the contrasting fortunes of capital-intensive manufacturers, who have been hardest hit by the global slowdown, and labour-intensive businesses in the construction and retail sectors, who are benefitting from the rebound in the housing market and domestic consumption.
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