The Tatum Survey of Business Conditions August 2012

Sam Norwood

Summary as of August 1, 2012
As of August 1, the news is not good. The Tatum Index of Business Conditions, in its fourth consecutive decline, has reached the lowest level since the recession in March 2009. All indications were either down or level with last month. The one exception was employment, a lagging indicator, which improved slightly.

The ratio of respondents reporting improved conditions versus worse conditions hit 0.7, by far the lowest in the past year. This ratio indicates the approach of possible recessionary conditions.

Backlogs had a precipitous decline in the past 30 days. Only 14% of our respondents experienced higher order backlogs this month, down from 40% a month ago, and 25% indicated lower backlogs.

This is the first time in over two years that the Tatum Survey has had such strong indications of an approaching recession.

Tatum Index of Business Conditions
The Tatum Index of Business Conditions is a simple average of the ratio of our respondents who are reporting improvement versus those reporting a worsening in business conditions for the past 30 days and the next 60 days.

As of August 1st, the Tatum Index of Business Conditions continued its decline for the fourth consecutive month. The Index has declined to 1.5, the lowest level in over two years and within the Index range consistent with recessionary conditions. The 3-month moving average of the Index also declined.

Order Backlogs
The percentage of respondents who reported an improvement in orders on hand plummeted to 14% from 40% a month ago. The percentage reporting worsened backlogs rose to 25% from 22% last month.

Capital Expenditure Commitments
The percentage of respondents reporting higher commitments to capital expenditures declined to 20% from 26% a month ago. The percentage that committed less on capital equipment increased to 21% from 18%.

The percentage of respondents hiring more workers rose slightly to 20% from 18% last month. The percentage that indicated they did less hiring declined to 11% from 15%.

Capital Availability and Pricing
The percentage of respondents indicating an improvement in financing conditions declined to 14% from 21% a month ago. However, the percentage who indicated conditions were worsening also declined to 10% from 17% last month.

We hope you found Tatum's Commentary interesting and useful. We welcome your comments and questions. Click the link below to view the complete report: August 2012 Tatum Survey of Business Conditions


Sam Norwood 
Senior Partner 

Copyright 2012 Tatum, LLC All Rights Reserved.

Any use or reproduction of the contents of this report without the written consent of Tatum, LLC is strictly prohibited. The authors are not engaged in rendering legal, investment or other professional services by publication of this report. Information contained in this report should not be used as a substitute for professional advice, legal, investment or otherwise, on any particular issue. 


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