The Tatum Survey of Business Conditions October 2012
Summary as of October 1, 2012
Business conditions reversed what had been a five-month downward trend. In last month’s Survey, we said if business conditions continued downward, we could be looking at negative economic growth in the fourth quarter. This month’s survey indicates that fortunately, absent an unpredictable event, the fourth quarter will likely be weak but positive.
This month’s Survey shows the Northeast region as having the most negative reports; meanwhile, the Southwest and Southeast are the regions with the best business conditions.
Our employment indicator shows no change from recent months. With overall growth in the economy probably under 1%, our judgment is that there is simply insufficient need in the economy to absorb the numbers of people looking for work.
Order backlogs are showing robust growth, and this shows up more in our Technology segment than in basic manufacturing.
We are buoyed by the more positive indications in this month’s Survey, the first uptick in 6 months. Whether this has ‘legs” remains to be seen. See the details in the following slides.
Tatum 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 October 1st, the Tatum Index of Business Conditions turned up positively after five consecutive months of decline. Both the past 30-day and the 60-day outlook contributed to the uptick.
Order Backlogs
The percentage of respondents who reported an improvement in orders on hand rebounded to 29% from 21%. The percentage reporting worsened backlogs nudged down to 23% from 25%.
Capital Expenditure Commitments
The percentage of respondents reporting higher commitments to capital expenditures rose to 21% from 17%. The percentage committing less to capital equipment increased ever so slightly to 24% from 23%.
Employment
The percentage of respondents hiring more workers remained flat at 28%. The percentage indicating they did less also remained flat at 16%.
Capital Availability and Pricing
The percentage of respondents indicating an improvement in financing conditions rose to 16% from 12%. However, the percentage indicating conditions were worsening also rose, to 8% from 3% 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: October 2012 Tatum Survey of Business Conditions
Sam Norwood
Senior Partner
www.TatumLLC.com
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