The Tatum Survey of Business Conditions February 2009

Sam Norwood

As of February 1, 2009

Summary as of February 1, 2009

With business conditions deep in recession as of February 1, there is some bad news and a glimmer of good. The bad news, based on our Survey, is that Employment and Capital Expenditure Commitments continue to worsen. In the middle, capital availability steadily remains extremely scarce. On the brighter side, order backlogs are climbing, and the overall Tatum Index again rose slightly, suggesting that the worst of the decline may be behind us. A recovery, however, is not yet in sight.

Index of Business Conditions

Tatum's Index of Business Conditions combines elements of the past 30 days and the next 60 days into one number, summarizing our view of the current overall trend. The current month's index moved up for the third consecutive month, having reached its all-time low at November 1, 2008. The movement was slight, and the level of the Index, at 0.6, remains well in the range of recession. To view the Tatum Index of Business Conditions, please click on {
Index of Business Conditions}.

Order Backlogs

Order Backlogs are normally the most tangible indication of relative strength or weakness in near-term deliveries of products and services. As of January 1, order backlogs were stronger in our Survey looking both back 30 days and ahead 60 days. {
More about Order Backlogs}

Capital Expenditure Commitments

Capital Expenditure Commitments were down compared with the prior month and in the outlook for the next 60 days. This reflects justifiable caution in light of recent and current overall conditions, as well as slack credit availability and corporate need for liquidity. {
More about Capital Expenditure Commitments}


is typically a lagging indicator as businesses, in the face of uncertain conditions, are reluctant to reduce employment until the need is obvious and compelling. Employment continued to decline in January. The outlook for the next 2 months is for further reductions in employment. If this trend continues, and unemployment continues to rise, the result will extend the recession, and Employment could become a leading indicator instead of a lagging one. {
More about Employment}

Capital Availability and Pricing

The availability of capital remains extremely scarce and is expected to get worse despite the huge injections of liquidity into the financial system and the TARP money that banks have received. Banks are willing to lend only to their most credit-worthy customers, and leveraged acquisitions are almost non-existent. No turn-around in the economy can reasonably be expected until this frozen crdit situation changes. {
More about Capital Availability Pricing}

Segments, Regions, and Markets

The mid-west and northeastern regions showed matierally weaker conditions than all other regions. The Southwest and Pacific were the strongest regions. Among the industry comparisons, the Service sector moved into first place, displacing Technology, which was a close second. Not surprisingly, Manufacturing and Retailing showed by far the worst conditions as of Feburary 1. Large companies reported worse conditions than all others. Nevertheless, companies with national markets experienced better conditions than those serving local and regional markets. {
More about Demographics}

We hope you found Tatum's Commentary interesting and useful. We welcome your comments and questions. Click on {February 2008 Tatum Survey of Business Conditions}

Sam Norwood, Senior Partner
Glenn Passin, Partner
Copyright 2009. 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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