Coupa Software published the findings from its Business Spend Index (BSI), Q4 2020 Outlook. The Coupa BSI analyzes billions of dollars of aggregated and anonymized business spend decisions across Coupa’s platform, often serving as an early indicator of macroeconomic health over the next three to six months. The Q4 Outlook shows that business spend sentiment improved over the prior quarter (an increase of 6%), but overall confidence is still well below trend.
Following a quarter of modest improvement in corporate spending, the Coupa BSI suggests that businesses are continuing to adjust to the new normal and are beginning to return to pre-COVID spending levels, albeit at a slower rate than in the prior quarter. Though still cautious about the global economic outlook, businesses are spending more in areas related to remote work, such as technology, shipping and freight, and contingent workforce support.
Data from the past quarter shows the following year-over-year changes in business spending:
· 97% decrease in business spending on air travel
· 22% decrease in business spending on office supplies
· 13.5% increase in business spending on technology, including hardware, software and services
· 41% increase in contingent workforce spend
· 29% increase in business spending for shipping and freight
“The Coupa BSI Q4 Outlook indicates that business spend sentiment is continuing to recover from its sharp drop in Q1 as companies grow increasingly comfortable operating in the new normal,” said Jeff Collins, chief economist at Coupa. “However, despite the positive adjustments made by companies in most major sectors, our analysis shows that confidence in the economy is still low and is likely to remain below trend for at least the next three to six months.”
What to expect in the coming months:
· Businesses overall. Spend data indicates that overall, business spend sentiment is continuing to increase from its sharp drop in Q1 but is still below the trend line.
· Financial services. Despite rising default risk, business spend sentiment for financial services improved over the last two quarters and looks set to deliver solid growth for the next three to six months.
· Health and life sciences. Spend sentiment for health and life sciences increased significantly since last quarter. The sector likely benefited from the reduction in COVID-19 cases at the end of the summer and the return of elective surgeries.
· High tech. The impact the pandemic has had on remote work has been largely beneficial for the tech sector, and as a result high tech held a steady increase in business spend sentiment quarter-over-quarter.
· Manufacturing. Spend sentiment for manufacturing continues to decline, and as a result, contribution of the sector to GDP is likely to decline over the next three to six months.
· Retail. Business sentiment in the sector indicates that retail has improved modestly; however, the sector is still below trend likely related to multiple retailers filing for bankruptcy in 2020.