The Tatum Survey of Business Conditions December 2011
Summary as of December 1, 2011
Business Conditions have taken a sharp turn upward in both the past 30 days and in the 60-day outlook. One month ago there were hints of a possible turn-around from what had been slowing conditions most of 2011. This month confirmed that there has been a broad-based change for the better.
We do not have a clear explanation for the change. There is some hope that Europe will figure out a way to keep the Euro intact, and there seems to be some narrowing of the field of Republican presidential candidates. But these developments alone do not explain the breadth of change. Cumulatively, consumers and businesses have improved their balance sheets in the past 3 years; early reports on the holiday shopping season have been encouraging.
Improvements are reported in all supporting categories except capital expenditure commitments. However, there is typically a lag between improving overall conditions and the authorization and commitment for new capital assets. The outlook for “CapEx” is positive.
The turn-around in our survey is so strong that we are tempted to cancel our recession concerns for the near term. If we get another month of confirmation we will wipe our brows and look forward to a better beginning of 2012.
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 December 1st, the Tatum Index of Business Conditions moved up significantly and out of the recession range, to 3.0 from 1.8 a month ago. 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). If this is sustained in the next month we will cancel our concern about a near-term recession.
{Index of Business Conditions}
The percentage of respondents who reported an improvement in orders on hand rocketed to 28% from 14% a month ago. The percentage reporting worsened backlogs decreased to 15% from 23% last month.
{Order Backlogs}
The percentage of respondents committing more on capital equipment increased slightly to 21% from 19%. However, the percentage that committed less on capital equipment increased to 26% from 22%.
{Capital Expenditure Commitments}
The percentage of respondents hiring more workers moved up to 18% from 15% last month. The percentage that indicated they did less hiring improved to 14% from 18% in the prior month.
{Employment}
Capital Availability and Pricing
The percentage of respondents indicating an improvement in financing conditions improved to 17% from 13%. The percentage who indicated conditions were worsening declined to 13% from the high level of 15% 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: December 2011 Tatum Survey of Business Conditions
Sam Norwood
Senior Partner
www.TatumLLC.com
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