The Tatum Survey of Business Conditions February 2011

Sam Norwood

Summary as of January 1, 2010

As of February 1, Business Conditions continued to improve, and the outlook for the next 60 days in particular made a strong upward jump. The Tatum Index leaped to 10.7, its highest level since May 2007, driven mainly by the buoyant outlook for the next 60 days. The key drivers in the outlook were improvements in capital expenditure commitments and the availability of capital. Order backlogs went the other direction, suggesting weak seasonal factors, and employment, while very strong in the past 30 days, was negative in the outlook. Demographically, the Southwest region experienced the best improvement. National and International businesses reflected much better conditions than regional and mid-sized businesses. Services, technology and healthcare were the leading sectors.

Index of Business Conditions
Tatum’s Index of Business Conditions is a simple average of the ratio of our respondents who are reporting improvement versus those who are reporting a worsening in business conditions for the past 30 days and the next 60 days. As of February 1st, the Tatum Index of Business Conditions improved approximately 53% to 10.7. This was principally due to significant improvement in the outlook for the next 60 days and a steady improvement in the conditions experienced over the last 30 days. 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. The backlogs indicator softened after improving for four consecutive months. Taken in the context of the other indicators, we believe this down-tick reflects weak seasonal factors. {More about Order Backlogs}

Capital Expenditure Commitments
The past 30 days reflect a slight improvement with respect to capital expenditure commitments compared with last month. The outlook is for a sizeable increase of commitments over the next 60 days. The improved outlook may be tired to improvements in the technology, retail and manufacturing sectors, as well as rising confidence in the sustainability of the recovery and the availability of financing. {More about Capital Expenditure Commitments}

Employment in our respondents' companies reported a strong increase in January. Our respondents, however, are more cautious for the next 60 days in their plans for employment, possibly reflecting the conservatism that new employment has experienced over the course of this recovery. {More about Employment}

Capital Availability and Pricing
Optimism from our respondents was rewarded with improving conditions over the last 30 days, and this extends to the next 60 days. This reversed a several-month negative trend in the historical results.

Interest rates remain low. U.S. banks have $1 trillion on deposit at the Fed as they have been rebuilding their own capital. Larger businesses are taking advantage of the low rate environment to issue bonds. Corporate liquidity continues to improve.

Smaller, growing businesses are perhaps seeing modest cracks in their recent inability to access expansion capital; and this is reflected in both the historical results and the outlook. {More about Capital Availability and Pricing}

We hope you found Tatum's Commentary interesting and useful. We welcome your comments and questions. Click on {February 2011 Tatum Survey of Business Conditions} to view the complete report.

Sam Norwood, Senior Partner
Glenn Passin, Partner
Copyright 2011 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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