2. Tatum Survey of Business Conditions Summary
As of December 1, the results for the past 30 days show a modest respectable increase, up 10%. But
that was more than offset by a significant drop of 40% in those who see improved conditions in the
next 60 days. The ratio of those who see improvement in the next 60 days compared to those who see
worsening fell to 3.54, the lowest mark for this indicator since July.
Overall the Index of Business Conditions show a sharp decrease, going from 4.09 on November 1 to
3.04 on December 1. As a result the three-month moving average fell, from 4.08 to 3.70, back to a level
close to the October 1st mark. This is the first drop in the three month average in the last 11 months.
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Our data show a pronounced setback for sentiment about the forward looking outlook for business conditions.
Aggregated responses suggest that the rate of recovery will be slower in the coming two months than in the
recent past. Only 23% of our participants expect company headcount to increase over the next 60 days. While
this is the highest level in the last year, it is offset by an increase of comparable size in the percentage of
respondents who expect employment to decline in the next 60 days.
It appears that the perceived momentum for recovery may be slowing. The recovery may be getting tired. Based
on the overall trend, it is reasonable to expect the economy to continue to improve only slowly until hiring
accelerates and banks get more willing to lend. A slow but steady increase in home prices continues to be a
mild positive.
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3. 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 December 1st, the Tatum Index of Business Conditions fell significantly, from
4.09 on November 1st to 3.04. After 11 consecutive months of gains, the three-
month moving average decreased from 4.08 to 3.70.
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The decrease for the month was due to a sharp decrease in the 60-day
outlook ratio, more than offsetting a mild improvement in the ratio
regarding the past 30 days. The three-month moving average
decreased for the first time since January of 2009.
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5. Business Conditions - Trends
In the past 30 days, business conditions:
Improved for 30% of our respondents, unchanged from last month
Worsened for 12%, down from 13% last month
Stayed about the same for 59%, compared to 57% for last month
Changes are minimal versus the previous month and consistent with the last
Click Heremonths. While theHeadline
few to Add Slide portion of respondents who say that their business
has improved over the last 30 days is considerably higher than in the
summer (30% now versus 22% in July), this trend has flattened out. The rate
of improvement in business conditions appears to have leveled at a fairly low
plateau, at least for now.
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6. 100%
0%
20%
60%
80%
40%
12/1/2008 13% 39% 48%
1/1/2009 10% 45% 45%
2/1/2009 12% 45% 42%
3/1/2009 16% 44% 40%
4/1/2009 22% 51% 27%
Improved
5/1/2009 25% Click Here to Add Slide Headline 56% 19%
6/1/2009 26% 55% 19%
Stayed the same
7/1/2009 22% 61% 17%
Business Conditions the Past 30 Days
8/1/2009 23% 60% 16%
Worsened
9/1/2009 28% 57% 14%
10/1/2009 31% 55% 13%
11/1/2009 30% 57% 13%
12/1/2009 30% 59% 12%
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7. Business Conditions - Trends
The ratio of “Improved-to-Worsened” in the last 30 days rose
from 2.30 to 2.54 – a slight increase, following a slight decrease in
November. December’s gain resumed an upward trend that began
as of August 1.
It is useful to remember that the level at which sentiment appears to have flattened out
remains well above the 0.26 mark where it was in December 2008. The last year has seen a
Click Here to Add Slide Headline steady and substantial improvement.
There are two components in the analysis of these data. One component is the absolute
number and the trend of that number. The other is the first derivative of the trend,
meaning the rate of acceleration or deceleration.
Our data show that the combination of these two components peaked in October 2007
(two months before the Recession officially began) and reached bottom in December
2008, at least four months before there was corroborative evidence of the beginnings of a
recovery. The anticipatory nature of our survey trends reflect the more subtle rate of
change as well as the overall trend.
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8. Business Conditions - Trends
Ratio of “Improved” to “Worsened” – Past 30 Days
Total
5
4
3
Click Here to Add Slide Headline
2
1
0
Feb-09
Apr-09
Jun-09
Nov-09
Dec-08
Jan-09
Mar-09
May-09
Dec-09
Oct-09
Sep-09
Jul-09
Aug-09
Ratio
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9. Business Conditions - Trends
In the next 60 days, business conditions are expected:
To improve for 38% of our respondents, a decrease from 43% reported last
month
To get worse for 11%, an increase from 7% last month
To remain about the same for 51%, a slight increase from 50% last month
Click Here to Addfor improvementnext 60 days is the lowest since July of this
The outlook
Slide Headlinedown considerably. The 38% expecting
business improvement in the
is
year. Additionally, the 11% expecting business to get worse is the highest
since July. Clearly the growing optimism seen earlier in the fall has waned
somewhat. It remains to be seen whether this is simply a pause in the
recovery or a real faltering in the comeback from the low levels of sentiment
at the end of last year.
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11. Business Conditions - Trends
In the next 60 days:
The ratio of “Will Improve” to “Will Worsen” decreased significantly from
the previous month, dropping from 5.88 to 3.54.
This is a very sensitive measurement that (as in this case) can shift
dramatically. Therefore the 3-month moving average index of business
conditions makes it easier to see the overall trend.
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The 3-month moving average dropped – from 4.08 in October to
3.70 in December. The sharp drop in forward-looking sentiment
dragged down the moving average, out-weighing the incremental
improvements seen in the several previous months.
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12. Business Conditions - Trends
Ratio of “Will Improve” to “Will Worsen” – Next 60 Days
Total
12
10
8
Click Here to Add Slide Headline
6
4
2
0
Mar-09
Sep-09
Oct-09
Apr-09
Aug-09
Feb-09
Jun-09
Jul-09
Nov-09
Dec-08
Jan-09
May-09
Dec-09
Ratio 12
13. Business Conditions – Current Results
Order Backlogs
In the past 30 days:
The percentage of respondents who reported an improvement in backlogs
increased from 27% to 30%. The percentage reporting lower backlogs also
increased, moving from 15% to 17%.
In the next 60 days:
The percentage of respondents who indicated expectations of higher
Click Here to Add Slidefrom 41% to 36%. The “Will Worsen” percentage
backlogs decreased Headline
increased from 8% to 11%.
The results indicate that conditions and expectations for business activity
over the next 60 days have dipped. Slightly more respondents (53%) say
that backlog will stay the same than was true for November (51%).
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14. Business Conditions – Current Results
100%
80%
60%
40%
100%
Order Backlog Analysis
20%
80%
0%
4/1/2009
1/1/2009
2/1/2009
3/1/2009
5/1/2009
6/1/2009
7/1/2009
8/1/2009
9/1/2009
12/1/2008
10/1/2009
11/1/2009
12/1/2009
60%
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40%
Improved Stayed the same Worsened
20%
0%
Past 30 Days
1/1/2009
2/1/2009
3/1/2009
4/1/2009
5/1/2009
6/1/2009
7/1/2009
8/1/2009
9/1/2009
12/1/2008
10/1/2009
11/1/2009
12/1/2009
Will Improve Will Stay the same Will Worsen
Next 60 Days
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15. Business Conditions – Current Results
Capital Expenditure Commitments
In the past 30 days:
The percentage of respondents committing more on capital equipment
increased from 17% to 20%. The percentage that committed less on capital
also increased, from 23% to 26%.
In the next 60 days:
The percentage of respondents who said they plan to commit more for
capital assets in the next 60 days decreased from 27% to 24%. The
Click Here to Add Slide Headline less increased slightly, from 19% to 20%.
percentage who expect to commit
The data trend on capital expenditure commitments is mildly negative.
While there are signs of improvement in spending in areas such as
information technology, this trend may be indicative mostly of larger firms.
The kind of robust capital spending that would power a strong economic
recovery is not yet visible.
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16. Business Conditions – Trends
100%
80%
Capital Expenditure
60%
Commitments Analysis
40%
100%
20%
80%
0%
1/1/2009
2/1/2009
3/1/2009
4/1/2009
5/1/2009
6/1/2009
7/1/2009
8/1/2009
9/1/2009
12/1/2008
10/1/2009
11/1/2009
12/1/2009
60%
Click Here to Add Slide Headline 40%
Increased Stayed the same Decreased
20%
0%
Past 30 Days
12/1/2008
1/1/2009
2/1/2009
3/1/2009
4/1/2009
5/1/2009
6/1/2009
7/1/2009
8/1/2009
9/1/2009
10/1/2009
11/1/2009
12/1/2009
Will Increase Will Stay the Same Will Decrease
Next 60 Days 16
17. Business Conditions – Current Results
Employment
In the past 30 days:
The percentage of respondents hiring more workers stayed the same as in
November at 15%. The percentage that indicated they did less hiring
increased from 14% to 17%. The net of these reflects a slightly less
encouraging report than in the previous month.
In the next 60 days:
Click Here percentage indicating they plan to increase hiring grew from 20% to
The to Add Slide Headline
23%. The percentage who expect to reduce hiring also increased, from
10% to 13% reversing a comparably sized decrease in November in those
expecting headcount to drop.
The outlook for employment is mixed, suggesting that a significant
change in the employment situation is still not in sight. This is
consistent with the national unemployment figures which appear to
have hit a plateau at a rate slightly over 10%.
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18. Business Conditions – Trends
100%
80%
Employment Analysis
60% 100%
40% 80%
20% 60%
0% 40%
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1/1/2009
2/1/2009
3/1/2009
4/1/2009
5/1/2009
6/1/2009
7/1/2009
8/1/2009
9/1/2009
12/1/2008
10/1/2009
11/1/2009
12/1/2009
20%
0%
2/1/2009
1/1/2009
3/1/2009
4/1/2009
5/1/2009
6/1/2009
7/1/2009
8/1/2009
9/1/2009
12/1/2008
10/1/2009
11/1/2009
12/1/2009
Increased Stayed the same Declined
Past 30 Days Will Increase Will stay the Same Will Decline
Next 60 Days
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19. Business Conditions – Current Results
Capital Availability and Pricing
The past 30 days:
The percentage of respondents indicating an improvement in financing
conditions dropped from 25% to 22%. The percentage who indicated
conditions worsened increased slightly from 7% to 8%.
In the next 60 days:
The percentage of the respondents who expect improvement in financing
conditions in the next 60 days decreased significantly from 34% to 25% The
Click Here to Addsaying conditions will get worse decreased from 7% to 6%.
percentage Slide Headline
The data are consistent with the picture conveyed by research companies and in the press.
Lending remains tight for all but the most credit-worthy borrowers. 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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20. Business Conditions – Trends
100%
Capital Availability /
80%
Pricing Analysis
60%
40% 100%
20% 80%
0% 60%
4/1/2009
1/1/2009
2/1/2009
3/1/2009
5/1/2009
6/1/2009
7/1/2009
8/1/2009
9/1/2009
12/1/2008
10/1/2009
11/1/2009
12/1/2009
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40%
20%
Improved Stayed the same Worsened
0%
Past 30 Days
12/1/2008
10/1/2009
11/1/2009
12/1/2009
3/1/2009
1/1/2009
2/1/2009
4/1/2009
5/1/2009
6/1/2009
7/1/2009
8/1/2009
9/1/2009
Will Improve Will Stay the same Will Worsen
Next 60 Days
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21. Survey Participation Demographics – Industry
Manufacturing/Processing 26%
Service 20%
Healthcare 15%
Technology 11%
Government 6%
Retail 4%
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Financial 3%
Real Estate 3%
Wholesale 3%
Bio-Tech/Life Sciences 2%
Other 7%
21
22. Survey Participation Demographics - Markets/Regions
Primary Geographic Markets
Local 12%
Regional 24%
National 41%
International 23%
Geographic Regions Represented (Total of 221 Responses)
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Northeast 12%
Southeast 29%
Midwest 13%
Southwest 18%
Pacific 28%
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23. Survey Participation Demographic Summary
The following are on relative scales from our respondents:
Regions: Industries:*
Strongest – Northeast Strongest – Technology, Service, Financial
Weakest – Midwest Weakest – Manufacturing, Wholesale
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Markets Served: Company Size:
Strongest – International & Local Strongest – Pre-revenue & Large
Weakest – Regional & National Weakest – Small, Mid-Market
* With statistically significant participation
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24. Compiled and Analyzed by
Sam Norwood – Senior Partner
Mark Rosenman – Director of Knowledge Management
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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.
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