Strategic Finance

CFO Survey Points to Dramatic Upswing Ahead for U.S. Business Conditions

November metrics picked up sharply, and "all forward-looking indicators are positive," according to monthly Tatum report on mid-sized firms.

By Roy Harris

After offering mere hints in October of a possible upturn in U.S. business conditions, the Tatum November survey of CFOs now presents evidence that corporate activity could be about to help lead a recovery.

The corporate-finance services and recruiting firm's research registered sharp rises both in measurements of corporate business conditions for the past 30 days, and for the 60-day outlook -– what Tatum called “a broad-based change for the better.”

Specifically, CFO ratings related to capital availability, order backlogs and hiring also improved, both for the past month, and in terms of expectations for the next 60 days.

Its overall business conditions index -– supported by most of those individual indicators in the survey -– jumped to 3.0 from 1.8 in October. A 2.0-to-3.0 range correlates strongly with zero economic growth, with below-2.0 suggesting recession conditions, according to Tatum. But it said that if a 3.0-or-higher were to be sustained in future months, “we will cancel our concern about a near-term recession.”

CFOs saying that business conditions had improved in November rose to 29% from 25% the prior month, while those saying conditions worsened shrank to 14% from 18% -- and 57% said conditions were unchanged.

Looking ahead 60 days, the picture was just asy bright, with 42% of respondents saying they expected improvement, up from 36% the prior month, while the 10% expecting worse conditions represented a decline from October’s 16%. (The "unchanged" percentage was 48.)

‘Beginning of a Recovery?’

The results could signal “the beginning of a recovery from what have been persistently weak business conditions for most of this year,” Tatum senior partner Sam Norwood told “The bottom was two months ago when it appeared we were heading back into a period of negative growth. Then, a month ago the survey indicated a flattening of what had been a downward trend.”

The latest month’s “distinct, almost dramatic, indications of improvements," reflecting November observations and the outlook for the next two months, give great cause for hope, he added. “All forward-looking indicators are positive, a very unusual event in the past three years.”

The only weak indicator -– measuring levels of capital expenditure commitments over the past 30 days -– doesn’t detract much from the broader results, he said, because “commitments for capital assets usually lag other improvements by one to three months.” However, in that area, as well, the cap-ex outlook for 60 days was positive. [And other recent surveys, too, have suggested that an upturn may be ahead in that area.]

In analyzing the results from finance chiefs of 105 mid-sized companies around the country, Tatum said it lacked “a clear explanation for the change.” Possible factors included that progress by European nations to find a way to keep the single currency intact may be a positive element, along with a narrowing of the Republican presidential-candidate field. Also, consumers and businesses both have improved their balance sheets, and early holiday-shopping reports are encouraging.

“But these developments alone do not explain the breadth of change,” Tatum’s summary said.