According to IDC, IT spending is experiencing a modest deceleration in demand in the U.S. and only in specific sectors, such as PCs. The direct impact of a stagnating economy on spending has been mitigated by the weakness of the U.S. dollar.
International demand continues to mitigate the impact of the U.S. slowdown to some degree, particularly in relation to favorable currency trends which have buoyed the reported earnings of U.S.-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. Worldwide IT spending is expected to increase by 5.7% this year on a constant currency basis, down from last year's 7.2%.
"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."If the U.S. dollar were to begin strengthening, a downturn in IT spending could accelerate as the broad-based impacts and implications of the housing and financial crisis will require an extended period to stabilize.
"The global economy is still faced with a variety of risk factors," said Anna Toncheva, economist at IDC. "Intensifying financial instability, inflation pressures, and global imbalances have lead to increased synchronization of the business cycles between the U.S. and the rest of the world over the first quarter of 2008. When business cycles are closely tied together, macroeconomic shocks tend to spread faster from one area to another. And though the current housing and financial crisis in the U.S. seems comparable only to the mildest cases in world history, the compression on global economic activity will probably linger over the course of the next 6-7 quarters and will inevitably discourage investment plans."