oct 2009 tatum survey
TRANSCRIPT
Survey of Business Conditions10.01.2009
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Tatum Survey of Business Conditions SummaryAs of October 1, the results for the past 30 days were again positive except for a slight drop
related to financing conditions. However, the outlook for the next 60 days took a distinctively negative turn. While most indicators for the next 60 days turned negative, the two that were positive, Employment and Capital Expenditures, were particularly interesting and encouraging, as these have been lagging the other indicators in recent months.
The Index of Business Conditions decreased slightly, going from 4.2 to 4.0, due to the mostly negative outlook for the next 60 days. The three month moving average improved, however, going from 3.1 to 3.7.
Every recovery is uneven. Our Survey indicates near-term overall softness in the nascent recovery. While unemployment remains a major problem, our participants indicate that the
future for employment may be brighter than many other forecasts suggest.Based on the overall trend, we expect the economy to continue to improve but at a slow and
bumpy pace.
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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 who are 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 decreased slightly from 4.2 to 4.0. The three-month moving average increased for the tenth month in a row, from 3.1 to 3.7.
The slight drop in the index for the month was due to a drop in the 60 day component. The component based on the activity over the last 30 days was at 2.3, the first time this level has been reached in two years (September 2007---2.2). The
three-month moving average increased for the 8th month in a row.
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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
4.2 4.0
0
4
8
12
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10/09
Index 3 Mo. Avg.
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Business Conditions - TrendsIn the past 30 days, business conditions:
Improved for 31% of our respondents, an increase from 28% last month.Worsened for 13%, down slightly from 14% reported last month. Stayed about the same for 56%, compared to 58% for last month
Another month of improvement. This is the first time in almost 18 months that as many as 30% of our participants indicated demand is increasing. For
perspective, only 10% indicated improvement in January 2009, while nearly half showed decreases. As of October 1, only 13% indicated a decrease in conditions
for the prior 30 days.
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Business Conditions the Past 30 Days18
%
15%
13%
10% 12% 16
% 22% 25%
26%
22% 23% 28
% 31%
45%
37%
39%
45% 45
% 44%
51%
56%
55%
61% 60% 57
% 55%
37%
49%
48% 45
% 42% 40%
27% 19
%
19% 17%
16% 14%
13%
0%
20%
40%
60%
80%
100%
10/1/
2008
11/1/
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12/1/
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1/1/20
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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 1.94 to 2.34--the seventh month in a row the ratio has increased and the first time it has been over two (2.0) since September 2007.
To really appreciate the significance of this month’s results, we need only to look back to the results from last year. The result for this month
is 5 times higher than October of 2008, when the ratio was at 0.47
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Business Conditions - TrendsRatio of “Improved” to “Worsened” – Past 30 Days
0
1
2
3
4
5
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
Sep-
09
Oct-0
9
Total
Ratio
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Business Conditions - TrendsIn the next 60 days, business conditions are expected:
To improve for 47% of our respondents, a decrease from 50% reported last month. To get worse for 8%, the same as reported last month. To remain about the same for 45%, a increase from 42% reported last month.
The outlook is down slightly form last month but still significantly above the 13 month average of 33%. This may be a temporary blip, such as we reported in
February and July.
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Business Conditions - TrendsNext 60 Days
32%
20% 21% 26
%
27% 29% 35
% 39% 42
%
36% 39%
50%
47%
42%
38% 40
%
43% 43% 47
%
50% 50
% 49%
52% 52
%
42%
45%
26%
42% 39
% 31%
30% 24
% 14% 11
% 9% 12% 9% 8% 8%
0%
20%
40%
60%
80%
100%10
/1/20
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Improve Stay the same Worsen
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Business Conditions - TrendsIn the next 60 days:The ratio of “Will Improve” to “Will Worsen” decreased from last month,
going from 6.42 to 5.60.
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 decrease is due to the three percentage point decline in the respondents expecting business conditions to improve in the next 60 days.
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Business Conditions - TrendsRatio of “Will Improve” to “Will Worsen” – Next 60 Days
0
2
4
6
8
10
12
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
Sep-
09
Oct-0
9
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 25% to 30%. The percentage reporting lower backlogs decreased from 21% to 16%.
In the next 60 days:The percentage of respondents who indicated expectations of higher backlogs decreased from 50% to 45%. The “Will Worsen” percentage increased from 7% to 10%.
The results are consistent with general business conditions: an improvement during the past 30 days but a soft outlook for the next 60.
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Business Conditions – Current Results
Order Backlog Analysis
Past 30 Days
Next 60 Days
0%
20%
40%
60%
80%
100%
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Improved Stayed the same Worsened
0%
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100%
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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 increased from 13% to 15%. The percentage that committed less on capital decreased from 37% to 29%.
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 22% to 25%. The percentage who expected to commit less decreased from 21% at 15%.
It is encouraging to see a positive trend in capital expenditure commitments, suggesting that there have been improvements in confidence, capital availability, and improving outlooks for demand. Bear in mind that
commitments lag behind approvals to proceed, so the decisions were most likely made in the past month or two. If this is sustained, it will be a
good indication that the recovery is getting traction.
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Business Conditions – Trends
Capital Expenditure Commitments Analysis
Past 30 Days
Next 60 Days
0%
20%
40%
60%
80%
100%
10/1
/200
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11/1
/200
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12/1
/200
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/200
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Increased Stayed the same Decreased
0%
20%
40%
60%
80%
100%
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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 increased from 9% to 11%. The percentage that indicated they did less hiring dropped from 21% to 15%.
In the next 60 days:The percentage indicating they plan to increase hiring increased slightly from 21% to 22%. The percentage who expect to reduce hiring decreased from 17% to 12%.
While employment remains very weak, our respondents offer encouraging evidence of potential improvement. We particularly note the five
percentage point reduction in the outlook for further employment cuts.
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Business Conditions – Trends
Employment Analysis
Past 30 Days
Next 60 Days
0%
20%
40%
60%
80%
100%
10/1/
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11/1/
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12/1/
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1/1/20
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Increased Stayed the same Declined
0%
20%
40%
60%
80%
100%
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Will Increase Will stay the Same Will Decline
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Business Conditions – Current ResultsCapital Availability and Pricing
The past 30 days:The percentage of respondents indicating an improvement decreased from 27% to 25%. The percentage who indicated conditions worsened decreased from 9% to 8%.
In the next 60 days:The percentage of the respondents who expect improvement in financing conditions in the next 60 days decreased from 42% to 35% The percentage saying conditions will get worse decreased from 7% to 6%.
Financing remains problematic for all but the most credit-worthy borrowers. The banks continue to try to re-build their capital base and remain very cautious. Most small banks
have significant exposure to commercial real estate, an area that remains a concern. The outlook trend is more cautious than the recent past. Capital availability is one of the
keys to a sustainable recovery, and the need for capital will increase as the recovery gains momentum. Therefore, we are watching this indicator with particular attention.
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Business Conditions – Trends
Capital Availability /Pricing Analysis
Past 30 Days
Next 60 Days
0%
20%
40%
60%
80%
100%
10/1/
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11/1/
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12/1/
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1/1/20
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2/1/20
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3/1/20
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Improved Stayed the same Worsened
0%
20%
40%
60%
80%
100%
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11/1/
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1/1/20
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Will Improve Will Stay the same Will Worsen
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Survey Participation Demographics – IndustryManufacturing/Processing 23%Service 23%Healthcare 14%Technology 11%Real Estate 6%Financial 4%Retail 4%Wholesale 3%Government 3%Bio-Tech/Life Sciences 3%Other 6%
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Survey Participation Demographics - Markets/RegionsPrimary Geographic Markets
Local 13%Regional 25%National 38%International 24%
Geographic Regions Represented (Total of 238 Responses)
Northeast 13%Southeast 26%Midwest 13%Southwest 17%Pacific 31%
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Survey Participation Demographic Summary
The following are on relative scales from our respondents:
Regions: Industries:*Strongest – Northeast Strongest – Technology
Weakest – Southwest Weakest – Manufacturing & Real Estate* With statistically significant participation
Markets Served: Company Size:Strongest – International Strongest – Large & Pre-revenue
Weakest – Regional Weakest – Mid-Market
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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.