B2B Data

An economist friend of mine from Canada sent me a very interesting article earlier this week. It discussed a data point I haven't paid much attention to previously, but one that is increasingly important in our technology-driven economy – B2B data.

The author, Mark Skousen, may sound familiar to you given an article I wrote previously discussing the “Skousen Index.” To wit:

“[Dr. Mark Skousen stated] The reality is that business and investment spending are the true leading indicators of the economy and the stock market. If you want to know where the stock market is headed, forget about consumer spending and retail sales figures. Look to business spending, price inflation, interest rates, and productivity gains.”

Skousen is correct. The real economy, and one that delivers real levels of higher employment, wage growth, and economic stability, is driven by the “production”side of the economic equation. Individuals must produce first to have income with which to consume. Therefore, if you want to measure what is happening in the actual economy, measure what businesses, and the factors that directly affect them, are doing. If we combine those factors into a single index we see the following:

The Skousen index suggests that the current economy is significantly weaker than headline statistics state. However, Dr. Skousen's latest discussion on B2B Data is equally important. 

“Gross Output (GO) is a measure of sales or receipts of all industries throughout the production process, including business to business transactions (B2B). Most B2B activity is left out of GDP statistics which is a big part of the economy.

B2B activity actually declined significantly in the first quarter. According to the new Skousen B2B Index, business spending fell 2.8% to $22.7 billion in nominal terms compared to the 4th quarter.”

While consumer spending remained fairly stagnant, driven primarily by sharp increases in health care related spending driven by surging premiums, B2B spending has fallen markedly. Historically speaking, and as shown by the chart above, B2B spending has been a good indicator of where the economy is headed. This is because it measures spending through the entire supply chain.