The Tatum Survey of Business Conditions March 2011

Sam Norwood

Summary as of February 1, 2010

As of March 1, the recovery in Business Conditions slowed markedly in both the past 30 days and in the outlook for the next 60 days. The actual recovery rate has been slowing recently, but until March 1, the outlook had been strong. Current international and domestic developments and their probably impacts are gnawing away at our collective optimism. Specifically, rising oil prices will affect everything, and government budget battles cloud the horizon.

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 March 1st, the Tatum Index of Business Conditions declined approximately 22% to 8.3. This change was driven by a 35% decline in the past 30 days and a 19% decline in the 60-day outlook. The rations that make up the Index are subject to large percentage movements, but the direction is clear. We are witnessing a slowdown in the rate of recovery. 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 reversed the prior month's decline which we had interpreted as mainly a seasonal set-back. The outlook, however is weaker, contributing to the overall softer forecast. It is notable that only 1% see declines in their order backlogs. {More about Order Backlogs}

Capital Expenditure Commitments
Capital expenditure commitments are made based on decisions of one or more months in the past. In the past 30 days, commitments continued to improve. However, their outlook has turned into a mix of both a rise in the percentage increasing their commitments and a rise in those who plan to commit less. We see this mix in other indicators as well, suggesting greater differentiation in outlooks in different industries and markets. That is, the recovery is less evenly distributed. {More about Capital Expenditure Commitments}

The interesting mix of statistics in employment tells us that layoffs are continuing to decline (good trend) but new hires are also declining (not good news). This situation is very consistent with a recovery that has been going on a long time, but where the rate of change is stagnating. {More about Employment}

Capital Availability and Pricing
There was not much change during the past 30 days in financing conditions, but the outlook has deteriorated. While the recovery is continuing, however slowly, there is rising concern that interest rates will be rising along with inflation. {More about Capital Availability and Pricing}

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