Survey of Business Conditions 08.01.2009
Survey of Business Conditions08.01.2009
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Tatum Survey of Business Conditions SummaryAs of August 1, gains were seen in most indicators. The one exception was Capital
Expenditure commitments which typically lag by a month or two.
Employment is again up slightly. Backlogs were a bit weak, but the outlook is positive. The outlook for financing conditions was positive.
Most importantly, the Index of Business Conditions turned around from a one-month decline and is back close to the same level as two months ago. The Index was at 2.87 compared to 3.01 reported in June, the high point since September 2007.
In summary, the Recovery appears to be resuming after a one-month lull. Our Survey showed that business conditions bottomed and began to turn in the first quarter when GDP registered the second consecutive quarterly 6% decline. The improvements that our Survey registered through the second quarter were reflected in the recently released GDP figures: just a 1% decline. The moderate lull a month ago was temporary. We now feel that, despite continuing challenges, particularly in unemployment, high consumer debt, and troubled
commercial real estate, the recovery is gaining traction, and we believe GDP will likely turn positive, if barely, in the third quarter.
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Tatum Index of Business ConditionsThe Tatum Index of Business Conditions is a simple average of the ratio of our
respondents who are reporting improvement versus those who are reporting a worsening in business conditions for the past 30 days and the next 60 days.
As of August 1st, the Tatum Index of Business Conditions, after a one-month decline, went back to a positive trend, increasing from 2.2 to 2.9. The three-month moving average increased for the eighth month in a row from 2.5 to 2.7.
A month ago, our respondents had concerns about whether the nascent recovery was sustainable. During the last month those concerns lessened slightly while the outlook for the next 60 days clearly turned positive. We believe that when the Index
is 3 or above it is highly likely that GDP is positive.
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Tatum Index of Business Conditions
5.5 4.8
9.8 9.5
8.5
12.3
5.4 5.2 6.0
5.1
2.2 2.1 1.7 2.0 1.4 1.2 1.5
2.1 2.7 2.6
1.7 2.0
0.9 0.4 0.4 0.5 0.6 0.8
1.7 2.3
3.0 2.2
2.9
0
4
8
12
16
12/06
01/07
02/07
03/07
04/07
05/07
06/07
07/07
08/07
09/07
10/07
11/07
12/07
01/08
02/08
03/08
04/08
05/08
06/08
07/08
08/08
09/08
10/08
11/08
12/08
01/09
02/09
03/09
04/09
05/09
06/09
07/09
08/09
Index 3 Mo. Avg.
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Business Conditions - TrendsIn the past 30 days, business conditions:
Improved for 23% of our respondents, a slight increase from 22% last month.Worsened for 16%, a slight improvement down from the 17% reported last month. Stayed about the same for 61%, the same as last month.
Overall there was a small, but positive, change from last month. We interpret this as an indication of modest business improvement in the month of July.
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Business Conditions the Past 30 Days24
%
24%
18%
15%
13%
10% 12% 16
% 22% 25%
26%
22% 23%
49% 52
%
45%
37%
39%
45% 45
% 44%
51%
56%
55%
61% 60%
27% 23
%
37%
49%
48% 45
% 42% 40%
27% 19
%
19% 17%
16%
0%
20%
40%
60%
80%
100%8/1
/2008
9/1/20
08
10/1/
2008
11/1/
2008
12/1/
2008
1/1/20
09
2/1/20
09
3/1/20
09
4/1/20
09
5/1/20
09
6/1/20
09
7/1/20
09
8/1/20
09
Improved Stayed the same Worsened
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Business Conditions - Trends
The ratio of “Improved-to-Worsened” in the last 30 days increased from 1.27 to 1.44--the fourth month in a row the ratio has been above one (1) and the highest since July of last year.
Business Conditions moved further in the direction of recovery. Our prior report of a lull last month appears to have been pause
for consolidation of the directional turn that began in the first quarter.
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Business Conditions - TrendsRatio of “Improved” to “Worsened” – Past 30 Days
0
1
2
3
4
5
Aug-
08
Sep-
08
Oct-0
8
Nov-
08
Dec-
08
Jan-
09
Feb-
09
Mar-0
9
Apr-0
9
May-
09
Jun-
09
Jul-0
9
Aug-
09
Total
Ratio
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Business Conditions - TrendsIn the next 60 days, business conditions are expected:
To improve for 39% of our respondents, an increase from 36% reported last month. To get worse for 9%, a positive change from 12% reported last month. To remain about the same at 52%, the same as reported last month.
The picture regarding the outlook for the next sixty days is much clearer and positive, with the lowest proposition of our respondents expecting business
conditions to get worse since before the Recession began.
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Business Conditions - TrendsNext 60 Days
42%
42%
32%
20% 21% 26
%
27% 29% 35
% 39% 42
%
36% 39%
41% 45%
42%
38% 40
%
43% 43% 47
%
50% 50
% 49%
52% 52
%
17% 14
%
26%
42% 39
% 31%
30% 24
% 14% 11
% 9% 12% 9%
0%
20%
40%
60%
80%
100%
8/1/20
08
9/1/20
08
10/1/
2008
11/1/
2008
12/1/
2008
1/1/20
09
2/1/20
09
3/1/20
09
4/1/20
09
5/1/20
09
6/1/20
09
7/1/20
09
8/1/20
09
Improve Stay the same Worsen
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Business Conditions - TrendsIn the next 60 days:The ratio of “Will Improve” to “Will Worsen” turned positive again after a
one-month decline, increasing to 4.30 from 3.16.This is a very sensitive measurement that can shift dramatically. Therefore the
3-month moving average index of business conditions makes it easier to see the overall trend.
The amber alert is no longer required for now. The strong rebound in this index indicates our respondents expect better results for the
balance of the current (third) quarter.
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Business Conditions - TrendsRatio of “Will Improve” to “Will Worsen” – Next 60 Days
0
2
4
6
8
10
12
Aug-
08
Sep-
08
Oct-0
8
Nov-
08
Dec-
08
Jan-
09
Feb-
09
Mar-0
9
Apr-0
9
May-
09
Jun-
09
Jul-0
9
Aug-
09
Total
Ratio
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Business Conditions – Current ResultsOrder Backlogs
In the past 30 days:The percentage of respondents who reported an improvement in backlogs increased from 20% to 22%. The percentage reporting lower backlogs rose from 22% to 27%.
In the next 60 days:The percentage of respondents who indicated expectations of higher backlogs increased from 38% to 41%. The “Will Worsen” percentage decreased slightly from 12% to 11%.
The results for order backlogs are mixed. Retail and wholesale sectors remain very weak, and orders for Fall delivery declined in some sectors from the month before. To some degree, this decline in July might reflect seasonal
factors. It is encouraging that the outlook has turned around from last month and shows our respondents expect improvement in orders in the next 60 days.
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Business Conditions – Current Results
Order Backlog Analysis
Past 30 Days
Next 60 Days
0%
20%
40%
60%
80%
100%
8/1/20
08
9/1/20
08
10/1/
2008
11/1/
2008
12/1/
2008
1/1/20
09
2/1/20
09
3/1/20
09
4/1/20
09
5/1/20
09
6/1/20
09
7/1/20
09
8/1/20
09
Improved Stayed the same Worsened
0%
20%
40%
60%
80%
100%
8/1/20
08
9/1/20
08
10/1/
2008
11/1/
2008
12/1/
2008
1/1/20
09
2/1/20
09
3/1/20
09
4/1/20
09
5/1/20
09
6/1/20
09
7/1/20
09
8/1/20
09
Will improve Will stay the same Will worsen
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Business Conditions – Current ResultsCapital Expenditure Commitments
In the past 30 days:The percentage of respondents committing more on capital equipment decreased from 14% to 11%. The percentage that committed less on capital increased from 30% to 32%.
In the next 60 days:The percentage of respondents who said they plan to commit more for capital assets in the next 60 days increased from 19% to 21%. The percentage who expected to commit less remained at 21%.
We believe the decline in commitments in the month of July reflect a combination of seasonal factors as well as the temporary concerns that we
reported a month ago. Commitments reflect decisions that were made a month or two ago when we saw a temporary lull in confidence. The outlook
is somewhat brighter now.
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Business Conditions – Trends
Capital Expenditure Commitments Analysis
Past 30 Days
Next 60 Days
0%
20%
40%
60%
80%
100%
8/1/
2008
9/1/
2008
10/1
/200
8
11/1
/200
8
12/1
/200
8
1/1/
2009
2/1/
2009
3/1/
2009
4/1/
2009
5/1/
2009
6/1/
2009
7/1/
2009
8/1/
2009
Increased Stayed the same Decreased
0%
20%
40%
60%
80%
100%
8/1/20
08
9/1/20
08
10/1/
2008
11/1/
2008
12/1/
2008
1/1/20
09
2/1/20
09
3/1/20
09
4/1/20
09
5/1/20
09
6/1/20
09
7/1/20
09
8/1/20
09
Will increase Will stay the same Will decrease
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Business Conditions – Current ResultsEmployment
In the past 30 days:The percentage of respondents hiring more workers improved robustly from 7% to 12%. The percentage that indicated they did less hiring decreased from 23% to 19%.
In the next 60 days:The percentage indicating they plan to increase hiring stayed at 20%. The percentage who expect to reduce hiring decreased from 16% to 13%.
The results regarding employment are headed in the right direction. The generation of jobs is a key part to the sustainability and robustness of the Recovery. A sustained recovery, largely dependent on rising consumption,
will require an improved employment situation, so we are particularly encouraged to see the responses on Employment.
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Business Conditions – Trends
Employment Analysis
Past 30 Days
Next 60 Days
0%
20%
40%
60%
80%
100%
8/1/20
08
9/1/20
08
10/1/
2008
11/1/
2008
12/1/
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1/1/20
09
2/1/20
09
3/1/20
09
4/1/20
09
5/1/20
09
6/1/20
09
7/1/20
09
8/1/20
09
Will increase Will stay the same Will decline
0%
20%
40%
60%
80%
100%
8/1/20
08
9/1/20
08
10/1/
2008
11/1/
2008
12/1/
2008
1/1/20
09
2/1/20
09
3/1/20
09
4/1/20
09
5/1/20
09
6/1/20
09
7/1/20
09
8/1/20
09
Increased Stayed the same Declined
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Business Conditions – Current ResultsCapital Availability and Pricing
The past 30 days:The percentage of respondents indicating an improvement increased from 19% to 25%. The percentage who indicated conditions worsened decreased slightly from 12% to 11%.
In the next 60 days:The percentage of the respondents who expect improvement in financing conditions in the next 60 days rose from 31% to 35% The percentage saying conditions will get worse went down from 9% to 6%.
The most significant factor this month was that only 6% of our respondents expect financing conditions to get worse in the next 60 days. Just 12 months ago this proportion
was 27%. Banks have money to lend, and the panic about a possible meltdown is over. Loan terms are now generally tougher (personal guarantees, more collateral, higher
coverages) but credit availability is there for those who can qualify.
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Business Conditions – Trends
Capital Availability /Pricing Analysis
Past 30 Days
Next 60 Days
0%
20%
40%
60%
80%
100%
8/1/20
08
9/1/20
08
10/1/
2008
11/1/
2008
12/1/
2008
1/1/20
09
2/1/20
09
3/1/20
09
4/1/20
09
5/1/20
09
6/1/20
09
7/1/20
09
8/1/20
09
Improved Stayed the same Worsened
0%
20%
40%
60%
80%
100%
8/1/20
08
9/1/20
08
10/1/
2008
11/1/
2008
12/1/
2008
1/1/20
09
2/1/20
09
3/1/20
09
4/1/20
09
5/1/20
09
6/1/20
09
7/1/20
09
8/1/20
09
Will improve Will stay the same Will worsen
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Survey Participation Demographics – IndustryManufacturing/Processing 24%Service 18%Technology 14%Healthcare 14%Government 5%Real Estate 4%Retail 4%Wholesale 4%Financial 3%Transportation 3%Other 7%
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Survey Participation Demographics - Markets/RegionsPrimary Geographic Markets
Local 11%Regional 24%National 38%International 27%
Geographic Regions Represented (Total of 252 Responses)
Northeast 14%Southeast 25%Midwest 15%Southwest 15%Pacific 31%
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Survey Participation Demographic Summary
The following are on relative scales from our respondents:
Regions: Industries*:Strongest – Pacific Strongest – Government & Service
Weakest – Midwest Weakest – Wholesale & Retail* With statistically significant participation
Markets Served: Company Size:Strongest – International Strongest – Mid-Market
Weakest – Regional Weakest – Pre-revenue & Small
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Survey of Business Conditions
Compiled and Analyzed bySam Norwood – Senior Partner
Glen Passin – Partner
Any use or reproduction of the contents of this report without the written consent of Tatum, LLC is strictly prohibited. The authors are not engaged in rendering legal,
investment or other professional services by publication of this report. Information contained in this report should not be used as a substitute for professional advice, legal,
investment or otherwise, on any particular issue.