The Tatum Survey of Business Conditions July 2009

Sam Norwood

Summary as of July 1, 2009

The nascent recovery in business conditions stalled as of July 1, and the outlook turned down for the first time this year. The symptoms of recovery (rising demand, commodity prices, gas prices and interest rates) are also the seeds that are slowing the pace of the fragile recovery, possibly even extending the Recession into next year. Employment had been looking modestly more positive in the prior two months, but as of July 1, the prior 30 days and the next 60 look disappointingly negative.

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 downfor the first time this year due primarily to the outlook for the next 60 days. While business conditions of the past 30 days (month of June) were about flat with the prior month's report, the outlook declined significantly. The outlook caused the Index to return to the zone of probable recession out of which it had climbed just a month ago. 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 strenght or weakness in near-term deliveries of products and services. As of July 1, order backlogs were flat to slightly weaker in our survey, looking back 30 days after several months of strong improvements. The outlook for the next 60 days turned negative, suggesting that new orders are expected to slow in the near future. This represents a reversal from last month when the outlook was quite positive. {
More about Order Backlogs}

Capital Expenditure Commitments

Captial Expenditure Commitments continued to improve, but the outlook flattened. We believe the commitments made in June were based on authorizations approved in the prior two months when optimism about an imminent recovery was gaining momentum. That optimism became more tepid in the month of June and cooled further after our survey based on the Employment report in early July. {
More about Capital Expenditure Commitments}


Employment had finally begun to look more positive in our survey in the prior two months. HOwever, this indicator flattened as of July 1, suggesting that the first phase of the recovery, which we believe was starting to get some traction in March, April and May, has hit at least a temporary snag. This lagging indicator needs to turn more positive again for a more sustainable recovery to take hold. {
More about Employment}

Capital Availability and Pricing

Capital Availabillity and Pricing reversed direction this month as long term rates rose and banks continued to tighten their underwriting standards with more intensive due diligence reviews. {
More about Capital Availability and Pricing}

Segments, Regions and Markets

There were only three segments showing significant distinctions in our analysis this month. Small and mid-sized businesses were having a much toughter time than large ones, businesses serving local markets reported weak conditions than those serving international markets, and the Southwest region was suffering dinstinctly more than any other region. {
More about Demographics

We hope you found Tatum's Commentary interesting and useful. We welcome your comments and questions. Click on {
July 2009 Tatum Survey of Business Conditions} to view the complete report.

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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