The appraisal of business conditions among mid-sized company CFOs slipped in August after a lonely one-month July uptick, according to index numbers provided by Tatum, a company that provides corporate-finance and other services to client companies. Expectations about how business conditions will change over the next two months also dipped in August.
The survey showed that 24% of executives saw general business conditions improve last month, down from 28% in the prior month, while the 17% saying conditions worsened compared with 14% in the prior month. (The reading for those seeing no change was 59% in the latest month, compared to 58%.) Over the next 60 days, 35% saw things improving, up from 34% responding that way in July, with a worsening expected by 8%, compared to 9% in July. No change in conditions was seen by 57%, unchanged from the prior month.
Tatum's index number showed the rating for business conditions at 2.9, off from 3.0 in July. After peaking at 10.7 in January, the index number had slid for five straight months, bottoming at 2.7 for June before turning up to 3.0 in July.
Mixed Results in Categories
The monthly survey sampling the executives' sense of current business conditions -- broken down into order backlogs, capital expenditures, employment, and capital availability and pricing --- was based on 143 email responses to a late-August questionnaire -- with seven of 10 coming from Tatum's CFO partners, and other respondents being corporate principals, managing partners or CIO partners with the Tatum organization.
Results seemed quite mixed in the breakdown of categories. In terms of order backlogs, for example, 28% saw an improvement in backlogs, up from 27%, while those reporting lower backlogs climbed to 18% from 17%. Higher backlog levels over the next two months were expected by 38%, up from 36%, while those saying the backlog picture "will worsen" numbered 7%, down from 10%.
Respondents committing more to capital spending increased to 21% from 19%, but the number committing less to cap-ex grew, too, to 26% from 21%. Still, looking ahead 60 days, 27% said they plan to commit more for capital assets, up from 24%, while the reading for those expecting to commit less declined, to 13% from 16%.
Tatum's reading of that result was that many commitments for new capital programs were put on hold, based on uncertainties that "were amplified by the debates about the federal debt limit." The modestly brighter cap-ex outlook, and the further declines in interest rates, it said, could be reflected in the slightly more positive expectations.
Capital Availability, Hiring Looking Up
In terms of capital availability, 14% saw an improvement in financial conditions, compared to 16% seeing such an improvement in July, while those seeing a worsening stayed flat at 16%. Looking ahead two months, improvement was expected by 18%, compared with 11% in July. And those saying conditions will worsen improved to 14% from 25%.
Additional hiring was reported by 22% last month, up from 21%, while 10% in August said they did less hiring, an improvement from 13%. Over the next 60 days, 20% see more hiring, up from 18%, with 12% expecting to reduce hiring, down from 16%.
Tatum noted that the next 60 days includes the beginning of the holidays, when seasonal hiring starts up. But it said the 60-day outlook reflected "a determination to invest in employment despite the overall general volatility and pall of uncertainty."