IT spending healthy but double-dip recession threat remains

IDC report cites pent-up IT demand offset by confidence crisis
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IDC has raised its projection of global IT spending following a rebounded in the first half of 2010.

The analysts said that post-recession pent-up demand in business, government and consumers had materialised as stronger than expected IT sales growth which led te company to raise its projection 6 per cent for the full year to $1.51 trillion. IDC predicts hardware will increase 11 per cent to $640m while software and services will increase 4 and 2 per cent respectively.

"The first half of 2010 was robust by any standards for the IT industry," said IDC vice president Stephen Minton. "PC shipments were strong, enterprise spending began to recover from the depths of the Great Recession, and consumers remained enthusiastic about new devices such as smartphones."

IDC said that emerging markets were leading the forecast growth with a "new wave of intense IT investment" in Brazil, Russia, India and China. IDC sounded a strong note of caution for established markets, citing the European debt crisis, reduction in government stimulus plans and high levels of unemployment. The analysts warned that financial turmoil and government austerity measures could impact vulerable economies such as Japan and the US.

"We stand in the middle of two powerful and opposing forces," said Minton. "On the one hand, the very real pent-up demand for new IT investment, which has driven the solid recovery in the first half of 2010 and which will hopefully continue into 2011."

"On the other hand, the potential loss of confidence in a global economy which remains extremely vulnerable to any further escalation of the European debt crisis or a deterioration in the U.S. stock market. The next three months will be crucial to determining which of these scenarios is more likely; in the meantime, IT vendors should plan accordingly by understanding the potential impact on their near-term revenues."

IDC offered an alternative "double-dip recession" scenario which would result in worldwide growth of just 1 per cent. Pesumably equating to a contraction of IT spending in countries like the US, Europe and Japan - offset by higher growth in emerging markets.

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