Business spending rose in Q2, but economy is “far from fully recovered”

Businesses gained enough confidence in the nation’s economic recovery during the second quarter of 2021 to boost their spending patterns slightly, although the pace of that rebound will vary widely between different sectors, according to a report from spend management tool vendor Coupa Software Inc.

San Mateo, California-based Coupa’s Business Spend Index (BSI) rose in the second quarter to 91.4 on a scale compared to the index’s baseline value of 100, which represents the state of business spend in the reference period of January 2018. That was up slightly from 91.3 in the first quarter and up steeply from its low point of 82.1 in the second quarter of 2020, just as pandemic lockdowns took effect.

The company says its BSI is “a predictive measure of business confidence and future economic opportunity based on the willingness of a business to commit to spend.” The figure is based on aggregated, anonymized business spend data flowing annually through the company’s platform. Launched in 2018, the index gained additional breadth following Coupa’s 2020 acquisition of supply chain software firm Llamasoft.

The latest figures show rising spend, and thus increased business demand, Coupa Chief Economist Jeff Collins said in a blog post. “While the U.S. economic output appears to be on a path to return to ‘normal,’ the BSI shows the economy is far from fully recovered and there will be significant differences across regions and industries,” he said.

To track those differences, Collins said he is following three economic variables. First, companies can expect to see increasing concerns about worker shortages — something that would have been difficult to imagine last quarter but is already occurring within the hospitality and healthcare industries as the U.S. returns to pre-pandemic levels of demand for labor, he said.

Second, commodity prices such as steel and lumber are already skyrocketing as the economy starts to rebound and activity picks back up, Collins said. And third, companies may increase their focus on on-shoring or near-shoring their supply chain flows as they continue to recovery from pandemic impacts to the flow of goods.