Outlook calls for gradual improvement in business spending

Businesses are showing steady improvement in their spending outlook as 2021 gets underway, following a sharp decline in the early days of the coronavirus pandemic. Spend management technology vendor Coupa Software said business spend sentiment improved for the third straight quarter in Q4 and that the first-quarter outlook calls for gradual improvement, according to the firm’s Business Spend Index (BSI), Q1 2021 Outlook. 

The index grew 2.9% in Q4 but remained below trend, Coupa researchers said.

In general, businesses are spending more on shipping, technology, and contract or project-based workers. Year-over-year, the index tracked a 12.3% increase in business spending for shipping and freight in the fourth quarter, bolstered by heightened global demand in e-commerce, healthcare, and consumer packaged goods (CPG) industries, according to Coupa. The BSI also noted a nearly 12% increase in business spending on technology and a nearly 23% increase on contingent workforce spending. The BSI tracked a 96% decrease in business spending on air travel and a 25% decrease in spending on office supplies year-over-year in Q4.

Businesses remain cautious about the global economic outlook, primarily due to the pandemic.

“While the Coupa BSI Q1 2021 Outlook shows modest improvement overall, a return to trend is unlikely until the number of new [Covid-19] cases reported daily has been significantly reduced,” Jeff Collins, chief economist at Coupa, said in a statement. “Although government action to combat the economic consequences of the pandemic has likely mitigated the depth of the downturn, we do not expect the U.S. economy to return to ‘normal’ levels of output or employment in the next three to six months.”

Among the specific industries BSI tracks, manufacturing and retail spend sentiment are improving but remain below trend, according to the data. 

The Coupa BSI analyzes billions of dollars of aggregated and anonymized business spend decisions across the company’s platform, according to Coupa. Researchers say the data serves as an early indicator of macroeconomic health over the next three to six months.