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U.S. companies in October increased their orders of machinery and equipment that signal investment plans by the largest amount in five months, a hopeful sign for future economic growth.

Orders for core capital goods, considered a proxy for business investment, rose 1.7 percent in October, the best showing since a 2.3 percent rise in May, the Commerce Department said Tuesday. Orders in this category had slowed beginning in the spring, acting as a drag on overall economic growth.

Total orders for durable goods were unchanged in October at $216.9 billion following a 9.2 percent jump in September that had been driven by a surge in demand for commercial aircraft. In October, demand for machinery, primary metals and communications equipment increased while orders for autos, airplanes and computers fell.

Many businesses had been holding back because they are worried about tax increases and federal spending cuts — known as the "fiscal cliff" — that will take effect in January unless Congress reaches a budget deal before then. Most economists predict the economy will suffer a recession in the first half of 2013 if lawmakers and President Barack Obama can't avoid the fiscal cliff.

White House economists on Monday warned that the uncertainty of a potential hike in taxes next year for middle class taxpayers could hurt consumer confidence and spending during the crucial holiday shopping season.

Businesses have also grown more cautious because Europe's financial crisis has pushed many countries in the region into recession. That has cut into U.S. exports and corporate profits. Growth has also slowed in China, Brazil and other big developing nations which are major markets for American exports.

U.S. factory activity grew in October for a second straight month, according to the Institute for Supply Management closely watched manufacturing survey. But regional surveys indicated manufacturing shrank this month in the Philadelphia and New York regions, partly reflecting damage from Superstorm Sandy that disrupted area factories.

The storm may have also weighed on durable goods orders in October, although most economists expect the storm's impact to fade in the coming weeks.

The economy is expanding at a modest pace. Many economists now predict growth at an annual rate of roughly 3 percent in the July-September quarter, up from the initial estimate of 2 percent reported last month. The government releases its second estimate for third-quarter growth on Nov. 29.

Still, many economists say the economy is growing in the current October-December quarter at an annual rate below 2 percent. That's too slow to make much of a dent in the unemployment rate, which was 7.9 percent last month

For holiday shoppers, retailers' approach to fees, returns and other practices can bring praise or anger. And when customers rant or rave, Consumer Reports takes note — and compiles them into its annual "Naughty and Nice" list of companies.

"They're policies and practices that people either felt were consumer-friendly or not," Consumer Reports senior editor Tod Marks tells NPR's Steve Inskeep. He adds that the list isn't related to the ratings his magazine is known for.

The list includes 20 widely known companies — such as grocery stores Publix and Safeway (nice), and airlines Delta and Spirit (naughty).

The "naughty" offenses range from BMW and other carmakers' omission of spare tires in new models, and the clothing chain Forever 21's two separate policies for online and in-store returns.

Of particular note in this holiday season, retailer Abe's of Maine was criticized for the many exceptions to its 30-day money-back guarantee. Marks says that under the policy, the seller of electronics and appliances doesn't include microwaves, watches, TVs, laptops and other items.

The Naughty and Nice list reflects the opinions of Consumer Reports experts, along with the magazine's Facebook friends, Twitter followers and online subscribers, Marks says.

"Really, people are just so frustrated," he says. "And they're primarily frustrated because of the inability, or an unwillingness on the part of a lot of companies, to just simply listen to them."

On the "Nice" list, the return policies at Kohl's and Nordstrom came in for praise, as did the all-inclusive pricing of the Drury Hotel chain.

The Red Wing Shoe Co. was commended for allowing no-questions-asked returns of its boots. And PNC Bank won fans for offering a simple, unglamorous product: a free basic checking account, with no minimum balance.

Marks adds that a spot on the "Naughty and Nice" list doesn't necessarily mean a company is making a bad product.

"Oftentimes, we see companies that do very well in our survey, maybe they'll pop up on the naughty list," Marks says. "And conversely, we'll see companies that don't do so well sometimes have a nice policy ... We've got the good, the bad, and the ugly."

For merchants, the stars are lining up — at least so far.

Online sales were going strong Monday. And the National Retail Federation says Thanksgiving weekend spending shot up to $59.1 billion, nearly 13 percent more than last year's $52 billion.

Fortunately for retailers, those good numbers may keep coming because the heavens have lined up in such a way that the 2012 calendar "is a real plus," says Chris Christopher, an economist with IHS Global Insight, a forecasting firm. "There are more shopping days" than we've had in years, he notes.

That's because Thanksgiving fell on the earliest date possible. Since most people don't begin holiday shopping until Black Friday, separating the Thanksgiving turkey from the Christmas goose by as many days as possible is a good thing for retailers.

An Extra Weekend

But there are two other timing factors that may really help this year. One is that Christmas Eve lands on a Monday. Procrastinators — and you know who you are — will have both Saturday and Sunday, Dec. 22 and 23, to go to the mall. Retailers love it when they have a whole weekend to lure last-minute shoppers just as the Christmas Eve pressure is peaking.

And online dawdlers also can shop on that final weekend and still get the gifts delivered before sunset on Monday. Yes, you may pay more for the service, but Express Mail, UPS, FedEx and others will be making delivery rounds on Monday, Dec. 24. "This year is the best of times for people who like to wait until the last minute to shop," Christopher said.

But there's yet another calendar event that offers a sort of Powerball bonus. It's the fiscal cliff. If retailers' timing luck holds, that political and economic threat will be eliminated just in time to spur a celebratory round of shopping on the weekend before Christmas.

A Fiscal Cliff Surprise?

Here's how it may play out: Congress must fix the so-called fiscal cliff — a complex cluster of federal spending cuts and tax-break expirations that all come together at year's end.

Lawmakers are scrambling to put together a deal in this calendar year, and most economists and pundits think they will find some way to compromise. But for now the threat of inaction may be dampening many people's enthusiasm for shopping.

For example, it's not yet clear how many automatic spending cuts will kick in next year. If Congress were to allow all of the currently scheduled reductions to take effect, many government contractors would lose their jobs next year. And many taxpayers know their tax bills may shoot up in January. None of that puts people in the mood to spend.

The White House is certainly aware of the threat hanging over the economy. On Monday morning, it issued a report in which its economic advisers say that "as we approach the holiday season, which accounts for close to one-fifth of industry sales, retailers can't afford the threat of tax increases on middle-class families."

In a statement on the White House report, National Retail Federation CEO Matthew Shay agreed that congressional inaction would lead to "stifled job creation, and dampened consumer confidence, which will ultimately lead to lower retail sales and potentially another recession."

Optimists note that lawmakers are not just members of Congress. They also are human beings who would like to be home for the holidays.

An Incentive For Lawmakers

So members of Congress have a great deal of incentive to wrap up any legislative package dealing with the fiscal cliff by Friday, Dec. 21. Christopher said he believes a compromise will be reached by that date.

If he's right, the cloud of uncertainty would lift just in time to brighten Americans' economic mood as they go shopping on that final weekend before Christmas.

Of course, the gamble could go the other way. If Congress remains hopelessly deadlocked as of Dec. 21, it could throw a big wet blanket over the economy and discourage shopping in those crucial days leading up to Christmas.

For now, the retailers are crossing their fingers. "It is encouraging to see the Administration's acknowledgement that retailers and their customers will be among the hardest hit if our elected officials fail to address ongoing economic uncertainty," says Shay, in the retail trade group's statement. "The time for action is now."

So, sure, the Mayan calendar may say the world is ending on Dec. 21, but the countdown calendar for the fiscal cliff and Christmas Eve is pointing to good times.

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