The Tatum Survey of Business Conditions September 2013

Sam Norwood

Highlights of the Month:

•The Tatum Index fell for the third consecutive month, but only slightly.

•Most encouraging improvement is in employment, an indicator that had been very weak for the past 2 months.

•Capital expenditure commitments are weak and expected to weaken further in the next 60 days.

•Financing conditions are deteriorating and expected to get worse.

•Compared to a year ago, business conditions are stronger, but we question whether they are strong enough to be self-sustainable with less monetary stimulus.

Business conditions in the third quarter were not as strong as in the second. Concerns are rising about the cost and availability of credit. Capital expenditures are being curtailed, perhaps reflecting concerns about financing conditions. However, we believe conditions are better than a year ago, and it’s possible that the fall months will bring a more positive trend leading into 2014.

Tatum Index of Business Conditions
The Tatum Index of Business Conditions is a simple average of the ratio of our respondents for the past 30 days and the next 60 days.

As of September 1, the Tatum Index moved down to 3.1 from 3.4 a month ago, reflecting a weakening trend in business conditions that began in the second quarter.

Although the GDP growth rate in the second quarter was a surprising 2.5% (revised up from 1.7%), the revision upward was due mainly to inventory accumulation and a more favorable trade balance. Improvements in consumer demand and business investment remained tepid, as was anticipated from the Tatum Index of Business Conditions. The Tatum Index suggests a weaker third quarter than the second.

Order Backlogs
The percentage of respondents who indicated improving orders on hand rose to 45% from 41%. Those reporting worsened backlogs declined to 13% from 16%.

Capital Expenditure Commitments
The percentage of respondents reporting higher commitments to capital expenditures remained at a relatively soft 33%. The percentage committing less to capital equipment rose modestly, moving to 21% from 19%.

The percentage of respondents hiring more workers rose significantly to 26% from 19% a month ago. Those indicating they did less hiring declined to 17% from 19%.

Capital Availability and Pricing
The percentage of respondents indicating improved financing conditions declined to 17% from 22%. Those indicating worsening conditions rose to 20% from 14% last month.

We hope you found Tatum's Commentary interesting and useful. We welcome your comments and questions. Click the link below to view the complete report: September 2013 Tatum Survey of Business Conditions


Sam Norwood 
Senior Partner 

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