FRAMINGHAM, MA – The stagnant economy will drive overall IT spending growth down to 4% in the US this year, compared to last year's growth of 6%, IDC says. First-quarter IT spending remained broadly in line with prior expectations, confirming a deceleration in some areas of demand in the US, says the research firm.
 
Worldwide IT spending is expected to increase by 5.7% this year on a constant currency basis, down from 7.2% last year. International demand continues to mitigate the impact of the US slowdown to some degree, particularly in relation to favorable currency trends, which have buoyed the reported earnings of US-based vendors. Some tentative signs of weakening demand and indicators have emerged in Europe and Asia, however, and there remains an elevated risk of further downside patterns in the next three quarters.
 
IT spending this year, with signs of softening demand in the PC market, confirm a broad-based but so far contained slowdown is in effect. IDC says hardware market growth in the US will be less than 2%, while software spending will increase 7% and IT services 5%.
 
Strongest growth continues to come from backend software, network equipment, and mobile devices. However, downside risks relating to macroeconomic weakness in the US are expected to persist throughout the remainder of 2008, says IDC.
 
"In a downside scenario, we could be at the beginning of a classic IT spending slowdown," said Stephen Minton, vice president of worldwide IT markets at IDC. "In every previous IT recession, the first sign of weakness has shown up in a softening of PC shipments. This has then transmitted to other hardware sectors within one quarter, to software license sales within half a year, and to the IT services sector if the recession persists for more than three quarters. Until we deviate from that course, we must closely monitor all other sectors of the IT and telecom industries for indicators of a further round of spending cuts. While this downturn will not resemble 2001 in terms of scale, it could yet be similar in terms of timing."
 
IDC has lowered its forecast for Western Europe to 4.1% growth in IT spending this year, and 5.4% for Asia/Pacific. Manufacturing exporters and financial services firms are likely to be the hardest hit, and this will be reflected in adjustments to their short-term IT investment plans. Booming growth has continued in resource-based economies such as Russia and the Middle East, however, and IT spending in those regions is expected to continue its double-digit rate of expansion this year.
 

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