The Tatum Survey of Business Conditions November 2011
Summary as of November 1, 2011
Business Conditions in the month leading to November 1 took a breather and up-ticked slightly after the severe decline reported in last month’s survey. The mood in last month’s survey was distinctively sour, and our survey this month indicates a leveling off or slight improvement in results in the last 30 days and expectations in the next 60 days. This is no cause for celebration; the levels remain at 2-year lows and the best that can be said is that at least the results and the mood have stopped declining.
Last month our respondents reported a determination to increase capital spending and hiring despite the negative expectations. This determination has apparently dissolved, as they now report that they have cut back hiring and spending in the last 30 days and will continue to do so in the next 60 days.
We also saw a significant bifurcation in geographic results, with the Pacific and Northeast reporting strong improvements, while the rest of the nation (particularly the Southeast) reported worsening conditions. The Services sector remained the strongest (as reported last month as well), and Manufacturing was by far the weakest among the significant reporting segments.
The flattening of our survey results remain mired in the lows experienced in the last recession. Have we entered into another recession? Our survey respondents seem to expect it and are reacting accordingly.
Index of Business Conditions
The Tatum Index of Business Conditions is a simple average of the ratio of our respondents who are reporting improvement versus those reporting a worsening in business conditions for the past 30 days and the next 60 days.
As of November 1st, the Tatum Index of Business Conditions increased slightly to approximately 1.8 from 1.7 a month ago, which was at a two-year low. In a range of 2.0 to 3.0, we have noted a very high correlation with near zero economic growth and below 2.0 suggests recession in the Tatum Index (the Index was in this range throughout the 2008-2009 recession). {Index of Business Conditions}
Order Backlogs
The percentage of respondents who reported an improvement in backlogs declined to 14% from 25% a month ago. The percentage reporting worsened backlogs increased to 23% from 20% last month.
{Order Backlogs}
Capital Expenditure Commitments
The percentage of respondents committing more on capital equipment decreased to 19% from 23%. The percentage that committed less on capital equipment increased to 22% from 16%.
{Capital Expenditure Commitments}
Employment
The percentage of respondents hiring more workers dropped precipitously to 15% from 22% last month. The percentage that indicated they did less hiring worsened to 18% from 16% in the prior month.
{Employment}
Capital Availability and Pricing
The percentage of respondents indicating an improvement in financing conditions improved slightly to 13% from 11%. The percentage who indicated conditions were worsening declined significantly to 15% from the high level of 23% reported last month.
{Capital Availability and Pricing}
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: October 2011 Tatum Survey of Business Conditions
Sam Norwood, Senior Partner Glenn Passin, Partner www.TatumLLC.com
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