The Tatum Survey of Business Conditions June 2010

Sam Norwood

Summary as of June 1, 2010

As of June 1 we see a leveling out in business conditions compared to the sharp rise in the Index in May. Our respondents report somewhat weaker conditions over the last 30 days, as indicated by order backlogs, capital expenditure commitments and capital availability. The Tatum Index of Business Conditions fells 17% from the heights of its May reading. Yet there was good news as well. Notwithstanding reporting weaker conditions over the last 30 days, respondents' overall outlook for the next 60 days actually rose 6%.

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. At June 1 the Index, which has increased steadily throughout 2009 and 2010, fell to 6.70 from 8.06 in May. This reading, however, is still very repectable, higher than any other reading for the year except May and January. 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. At June 1 the percentage of respondents expecting higher backlogs in the next 60 days also fell slightly. {
More about Order Backlogs}

Capital Expenditure Commitments
Capital expenditure commitements rose substantially in the last 30 days and there was also a sizable increase in expectations for higher capital spending in the coming 60 days. While overall business confidence has risen compared to 2009, businesses continue to defer updating of capacity and implementation of improved efficiencies. The rising tide of demand needed to drive discretionary business spending decisions for technology and other goods and services still has not appeared. {
More about Capital Expenditure Commitments}

Employment was a welcome exception to the overal drop in indicators over the last 30 days. The percentage of respondents who reported hiring more workers rose from 20% in May to 24% in June. But there was a 10% decrease in those indicating that they intend to increase hiring over the next 60 days. Despite the encouraging increase over the last 30 days, employment remains choppy, still a damper on hopes for a full-fledged recovery. {
More about Employment} 

Capital Availability and Pricing
Our respondents reported a drop in capital availability and pricing over the past 30 days. Theere was a smaller drop in those who expect improvement in the next 60 days. The mild deterioration in capital availability mirrors the fall off in capital expenditure commitments, reversing a three month gain from February 1 to May 1. While interest rates are holding steady at a low level, credit remains restricted. Debt and equity financing faces downward pressure as those with money to lend or invest continue to be risk averse. {
More about Capital Availability and Pricing}

Segments, Regions, and Markets
The southeast region was the strongest in the past 30 days while the weakest region was the midwest, as it was last month. Also consistent with May, businesses service local markets reported strongest conditions. Those serving regional markets reported relative weakness. Last month it was those serving international markets that were weakest; their relative gain in the last 30 days might inidcate lessening impact of the dollar strengthening against the Euro and turmoil in the credit markets related to Greece. Small companies repoted the strongest results as they did last month. Mid-market and large companies reported the weakest. Manufacturing/Processing, Retail and Finance companies were the strongest; Healthcare was the weakest, consistent with the previous month. {
More about Demographics}

We hope you found Tatum's Commentary interesting and useful. We welcome your comments and questions. Click on {
June 2010 Tatum Survey of Business Conditionsto view the complete report.

Sam Norwood, Senior Partner
Glenn Passin, Partner
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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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