The Tatum Survey of Business Conditions August 2013

Sam Norwood

Highlights of the Month:

• The Tatum Index fell due to relative weakness anticipated for the next 60 days.

• Most encouraging was the outlook for Order Backlogs, but we think this reflects seasonal pick-up for end of summer and back-to-school.

• Most negative is employment, to an extent far worse than other indicators. Weakness in Capital Expenditure commitments is seasonal.

• The prior month’s concern about near-term rising interest rates now appears premature in view of weak employment and a decline in the outlook for business conditions.

• Energy and international were the strongest sectors.

The past year’s trend suggests that the economy may have sufficient momentum to prompt a drop in monetary stimulus. However, if our current indications on employment are valid, we think the Fed will have a very complicated decision to make. The economy is growing, but at a very slow rate.

Tatum Index of Business Conditions
The Tatum Index of Business Conditions is a simple average of the ratio of our respondents for the past 30 days and the next 60 days.

As of August 1, the Tatum Index moved down to 3.4 from 5.4 a month ago, with the decline being driven by a more subdued outlook for the coming 60 days.

We see an improving trend in business conditions over the last 12 months. Month-to-month, we see fluctuations, but this is the first time in the past five years that we have witnessed such a consistent, continuous one-year trend.

The past 30 days were mostly level, but the outlook is more cautious.

Order Backlogs
The percentage of respondents who indicated improving orders on hand rose to 41% from 31%. Those reporting worsened backlogs increased to 16% from 10%.

Capital Expenditure Commitments
The percentage of respondents reporting higher commitments to capital expenditures declined to 33% from 42%. The percentage committing less to capital equipment rose significantly, moving to 19% from 11%.

The percentage of respondents hiring more workers dropped significantly to 19% from 34% a month ago. Those indicating they did less hiring increased to 19% from 12%.

Capital Availability and Pricing
The percentage of respondents indicating improved financing conditions declined to 22% from 30%. Those indicating worsening conditions rose to 14% from 10% 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 2013 Tatum Survey of Business Conditions

Sam Norwood 
Senior Partner 

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