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CFO Business-Conditions Index Slips

Roy Harris | Sept. 13, 2011
Survey with executives of midsized firms shows appraisal edging down after uptick; brightens a bit looking two months ahead.

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 percent of executives saw general business conditions improve last month, down from 28 percent in the prior month, while the 17 percent saying conditions worsened compared with 14 percent in the prior month. (The reading for those seeing no change was 59 percent in the latest month, compared to 58 percent.) Over the next 60 days, 35 percent saw things improving, up from 34 percent responding that way in July, with a worsening expected by 8 percent, compared to 9 percent in July. No change in conditions was seen by 57 percent, 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 percent saw an improvement in backlogs, up from 27 percent, while those reporting lower backlogs climbed to 18 percent from 17 percent.

Higher backlog levels over the next two months were expected by 38 percent, up from 36 percent, while those saying the backlog picture "will worsen" numbered 7 percent, down from 10 percent.

Respondents committing more to capital spending increased to 21 percent from 19 percent, but the number committing less to cap-ex grew, too, to 26 percent from 21 percent. Still, looking ahead 60 days, 27 percent said they plan to commit more for capital assets, up from 24 percent, while the reading for those expecting to commit less declined, to 13 percent from 16 percent.

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.


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