The Tatum Survey of Business Conditions January 2011

Sam Norwood

Summary as of January 1, 2010

As of December 1, Business Conditions reflected a strong improvement over the prior month. In the past 30 days overall conditions improved most notably in Order Backlogs and Capital Expenditure Commitments. Expectations for the next 60 days showed a strong improvement in the overall trend, with significant improvements seen in all of the individual supporting indicators except Employment.

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 January 1st, the Tatum Index of Business Conditions improved 7.7% to 7.0. This was primarily due to significant improvement in the outlook for the next 60 days, which offset an increase in the proportion of respondents who experienced worsening conditions in the past 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. Overall, the backlogs indicator improved for the fourth consecutive month, a tangible reason to sense that conditions in businesses that have order backlogs are getting better. {More about Order Backlogs}

Capital Expenditure Commitments
The past 30 days reflect flat overall experience with respect to capital expenditure commitments compared with last month. The outlook is for a decline of commitments over the next 60 days. The soft outlook is consistent with current weakness on the Technology sector. A factor in this modest outlook might be the timing of starting a new year and winter weather conditions. {More about Capital Expenditure Commitments}

In spite of the continuing improvement in overall business conditions, historical employment declined slightly in December. Our respondents, however, are more optimistic for the next 60 days in their plans for employment, possibly reflecting seasonal hiring at the start of a fiscal year. {More about Employment}

Capital Availability and Pricing
Optimism from our respondents wavered somewhat for the second consecutive month, and this extended to the next 60 days. Interest rates remain low but are starting to rise along with inflation on nearly everything except housing. 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 is improving. Smaller, growing businesses continue to find expansion capital hard to come by, and there is growing concern about rising interest rates. {More about Capital Availability and Pricing}

We hope you found Tatum's Commentary interesting and useful. We welcome your comments and questions. Click on {January 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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