The Tatum Survey of Business Conditions February 2012
Summary as of February 1, 2012
Business Conditions within the past 30 days showed mixed results, yet the 60-day outlook jumped in optimism. Our respondents may not have been thrilled with their own recent results, but they are optimistic about the future due, we think, to the upward trend since September and external trends.
The external trends are hard to ignore: A strong January stock market, generally positive earnings results reported by high-profile companies, and the European debt crisis falling, at least temporarily, into the background.
Interestingly, our respondents have not felt strong improvements in their own companies in the past 30 days. Orders on hand (backlogs) remained steady at the higher levels reported last month. Our respondents are remaining cautious on Cap Ex and hiring, apparently intending to meet their expectations of improving conditions with the current levels of capacity and human capital. They report a continued improvement in financing conditions, though we are still not at levels of a year ago.
The Tatum Survey is predicting continued growth, that, while not robust, suggests improving conditions in the coming months.
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 February 1st, the Tatum Index of Business Conditions held steady at 3.5 from last month after rising from a low of 1.7 last fall. The survey results continue to be solidly predicting that the economy will NOT be recessionary in the near term. In a range of 2.0 to 3.0, we have noted a very high correlation with near zero economic growth and below 2.0 suggests recession in the Tatum Index (the Index was in this range throughout the 2008-2009 recession).
Index of Business Conditions
Order Backlogs
The percentage of respondents who reported an improvement in orders on hand stayed steady at 32% from a month ago. The percentage reporting worsened backlogs increased to 16% from 10% last month, nearer to the 15% reported two months ago.
Order Backlogs
Capital Expenditure Commitments
The percentage of respondents committing more on capital equipment decreased significantly to 24% from 30% last month. The percentage that committed less on capital equipment decreased to 17% from 20%, while those reporting keeping capital spending flat jumped to 59% from 49%.
Capital Expenditure Commitments
Employment
The percentage of respondents hiring more workers fell to 20% from 26% last month. The percentage that indicated they did less hiring increase to 18% from 14%.
Employment
Capital Availabilty and Pricing
The percentage of respondents indicating an improvement in financing conditions jumped to 26% from 20% last month. The percentage who indicated conditions were worsening declined to 6% from 8%. This is the fifth month of sustained improvement in these indicators.
Capital Availability and Pricing
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: February 2012 Tatum Survey of Business Conditions
Sam Norwood
Senior Partner
www.TatumLLC.com
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