The Tatum Survey of Business Conditions January 2012
Summary as of January 1, 2012
Business Conditions have continued the upward turn that we saw last month, with the past 30 days showing improving results and the 60-day outlook more flattish to slightly positive. While the upward direction is encouraging, it is important to note that we have a way to go before we can say that our respondents are strongly optimistic and confident about the future.
Cautious optimism is a definite improvement over the negative outlook that we have been seeing in the recent past. This is despite continued uncertainties as we begin 2012: the issues surrounding the Euro, the unclear outlook for the U.S. economy and capital markets and the 2012 presidential election coming in the fall.
The backlog indicator was the most strongly optimistic, with continued improvement in actual results in the last 30 days and a strong jump in the 60-day outlook. Interestingly, while we saw an improvement in plans to increase CapEx spending and hiring, there was a schism with an slight increase in our respondents saying that they plan to cut back in these areas. These results are what keep the optimism damped down at this time.
The Tatum Survey is no longer predicting recessionary conditions, which is a cause for relief. Our respondents look ahead to 2012 with their domestic concerns somewhat subsided, but they are not yet saying “full speed ahead.”
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 January 1st, the Tatum Index of Business Conditions continued the upward trend that began last month, rising to 3.5 from 3.0 last month and up from a result of 1.8 two months ago. The survey results are now solidly predicting that the economy will NOT be recessionary in the near term. 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 2088-2009 recession).
{Index of Business Conditions}
Order Backlogs
The percentage of respondents who reported an improvement in orders on hand improved to 32% from 28% a
month ago. The percentage reporting worsened backlogs decreased to 10% from 15% last month. This is the second month of sustained improvement in these indicators.
Captial Expenditure Commitments
The percentage of respondents committing more on capital equipment increased significantly to 30% from 21%. The percentage that committed less on capital equipment decreased to 20% from 26%.
{Capital Expenditure Commitments}
Employment
The percentage of respondents hiring more workers increased significantly to 26% from 18% last month. The percentage that indicated they did less hiring stayed the same at 14%.
Captial Availabilty and Pricing
The percentage of respondents indicating an improvement in financing conditions improved to 20% from 17% last month. The percentage who indicated conditions were worsening declined to 8% from 13% reported last month. This is the fourth month of sustained improvement in these indicators.
{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: January 2012 Tatum Survey of Business Conditions
Sam Norwood
Senior Partner
www.TatumLLC.com
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