The Tatum Survey of Business Conditions May 2010
Summary as of May 1, 2010
As of May 1 the recovery in business conditions is picking up speed. Our respondents indicate that the last 30 days saw moves upward in recover backlogs, capital expenditure commitements and capital availability. The Tatum Index of Business Conditions leaped to the third highest level in its 7-year history. However, the improvement seen over the last 30 days did not translate into a comparably bullish view of the next 60 days. The 60-day outlook, while positive, remains flat with the prior month. Still, the recovery appears to be gathering strength and traction.
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 May 1 the Index, which has increased steadily if unspectacularly throughout 2009 and 2010, leaped to 8.06 from 5.91 in the previous month. It now stands at its highest level since May of 2007. . 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 May 1 order backlogs were reported to be significantly stronger during the past 30 days. But this didn't translate into a more optimistic outlook for the next two months: expectations for higher backlogs in the next 60 days remained constant with the previous month. {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. The increase in expectations for higher spending in the next 2 months was greater than was seen in the previous month. The most dominant trend of the past year has been a consistent reduction in the portion of respondents committing less or planning to commit less on capital projects. On the other hand the portion planning to increase capital spending remains below what is needed to cause a "takeoff" in the economy. {More about Capital Expenditure Commitments}
Employment
Despite other positive indicators about business conditions in other aspects of the survey, the employment indicator remains largely flat. Yet there was a small uptick in respondents indicating that they intend to increase hiring over the next 60 days. Still the portion of respondents indicating they plan to hire remains lower than needed to spark a robust recovery. {More about Employment}
Capital Availability and Pricing
Our respondents indicated that capital availability and pricing improved significantly in the past 30 days as did the outlook for this category for the next 60 days. If the improved outlook is an indication that banks are making more credit available to investors and companies, the impact will be seen in capital expenditures to meet rising demand as the economy comes out of recession. {More about Capital Availability and Pricing}
Segments, Regions, and Markets
The northeast region was the strongest in the past 30 days, which may be due at least in part to a catch-up effect after the severe winter weather. The weakest region was the midwest. Businesses serving local amrkets reported strongest conditions. Consistent with the previous month, those serving international markets reported relative weakness, perhaps as a result of the dollar strengthening against the Euro and turmoil in the credit markets related to Greece and other fiscally weak countries. Small companies reported the strongest results. Mid-market companies reported the weakest. Manufacturing/Processing and Finance companies ewre the strongest; Healthcare the weakest. {More about Demographics}
We hope you found Tatum's Commentary interesting and useful. We welcome your comments and questions. Click on {May 2010 Tatum Survey of Business Conditions} to view the complete report.
Sam Norwood, Senior Partner 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.
Glenn Passin, Partner
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