We may not get a double-dip recession. But we're not exactly in a recovery, either. So where is the U.S. economy going?
Economic data for August have helped push into the background worries that the economy would slip into recession again. Wall Street seemed to agree Friday, with shares resuming an atypical September rally that has driven the Dow Jones industrials nearer to the 11,000 mark.
September is usually a dog of a month for the market. Four times in the past decade, the S&P 500 shed at least 5 percent in September. The average September decline since 1950 is 0.6 percent. February is the next worst, with an average 0.2 percent loss.
And, investors haven't forgotten that the financial world collapsed in September just two years ago. And the Sept. 11 attacks, which delivered a devastating blow to the stock market, remain a painful memory.
But on Friday, traders ignored history and chose to latch onto news that business spending surged last month and to minimize a report showing that sales of new homes remained in the dumps.
In August, U.S. companies invested in computers, communications equipment and machinery, boosting capital goods orders for the third time in four months, according to the Commerce Department.
The 4.1 percent increase to capital goods in August signaled a rebound in business spending after orders fell 5.3 percent in July. It also suggests manufacturing, which has helped drive economic growth since the recession ended in June 2009, is still a bright spot in a weak recovery.
"Capital equipment spending remains one of the stronger sectors of the economy, and one of the bulwarks against a double dip," said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.
The durable goods report implied a modest pick-up in the growth pace in the third quarter after the economy expanded at a 1.6 percent annualized pace in the April-June period.
"We added two tenths of a percentage point to our estimate of third "We added two tenths of a percentage point to our estimate of third-quarter GDP growth after the (durable goods) report," said Zach Pandl, an economist at Nomura Securities International in New York. "Growth does seem to remain slow... but the fears of a double dip keep dissipating."
The overall demand for durable goods fell 1.3 percent in August, the Commerce Department said Friday. But that was pulled down by a significant drop in orders for aircraft. When excluding the volatile transportation sector, orders rose 2 percent — the best showing in five months.
In a second report, the department reported new single family home sales at a 288,000 unit annual rate, unchanged from July's rate, which was revised up from a previously reported 276,000 unit pace. However, the supply of houses on the market tumbled was the lowest in 42 years.
Data for August such as private sector employment, retail sales and home sales have also suggested an easing of the harsh conditions that gripped the economy in the second quarter.
But domestic demand remains lackluster as households struggle with high unemployment and shrinking wealth.
Concerns about those two key areas of the economy have prompted investors to hedge their bets by rushing into gold, a traditional safe haven in times of uncertainty.
U.S. gold futures surged to an all-time high at $1,300 an ounce in European trading on Friday. Just two years ago, it was trading at about $900.
Low interest rates, a falling dollar and anxiety over holding government debt have pushed investors and central banks alike to buy the metal — something tangible instead of a promise.
The Federal Reserve revealed its own anxiety about the economy earlier this week, saying it was ready to step in with more steps to support the recovery should it show signs of flagging further.
The Fed may be particularly concerned about deflation, a dangerous spiraling downwards of prices that can snuff out hiring, business investment, profits and other things that help economic growth.
On Monday, the National Bureau of Economic Research, a private, nonprofit research organization that calls the beginnings and endings of recessions, declared that the "Great Recession" that began in December 2007 ended in June 2009.
The announcement ruled out the possibility of a double-dip recession, at least officially, because any new economic slump would be seen as a brand new recession.
But as many Americans, regular folks and hot-shot investors alike, would tell you, it sure hasn't felt like much of a recovery yet, either.
Warren Buffett, one of the world's wealthiest people and a guru to many investors, said Thursday that he believes we're still in one big recession.
For Buffett, it's a matter of semantics rather than politics. The NBER considers a recession over when the economy gets back on the recovery path, while Buffett contends it isn't over until the damage is repaired.
"On any common sense definition, the average American is below where he was before, or his family, in terms of real income, GDP," Buffett said in a CNBC interview. "We're still in a recession. And we're not going to be out of it for a while, but we will get out of it."