IDC Lowers Forecasts For IT Spending in 2008, Citing Macroeconomic Weakness

IDC today announced that it has lowered its forecasts for IT spending in 2008, due to recent downward revisions to macroeconomic indicators and assumptions. As a result of these changes, IDC now predicts worldwide IT market growth of 5 percent this year, down from last year's pace of 6 percent. Global IT spending is now projected to reach $1.38 trillion this year, up from just over $1.3 trillion in 2007.

In the United States, growth is expected to weaken to 4% in 2008, compared with 6% in 2007.

These updated forecasts, published in the IDC Worldwide Black Book, reflect the negative change to economic indicators and projections since the previous quarter. The general reduction in anticipated growth for the U.S. economy has translated into forecast reductions across most IT market sectors. Additionally, historical correlations and recent IT buyer surveys confirm the view that market conditions are likely to weaken in the coming months.

"While there is still debate over the severity and length of a U.S. economic slowdown, we do know that the IT market will not escape unscathed from any significant downturn," said Stephen Minton, vice president of Worldwide IT Markets at IDC. "IT vendor performance will likely be buoyed to some extent by growth in emerging geographies, and perhaps by a weakening U.S. dollar, but we have also detected some signs of softer market conditions in Europe and Japan. Any recession in the U.S., meanwhile, would have repercussions across most major economies and IT markets."

Highlights of the new IDC Black Book include the following:

A 5% decline is expected for the U.S. PC market in 2008, following last year's growth of 2%.
Slower growth is now expected for software, services, storage, servers, and network equipment in the United States.
IT spending in Western Europe is expected to grow by just 4% this year, down from last year's 5%.
Market growth is expected to be just 2% in Japan this year.
Slower growth in China compared to last year (12% in 2008 compared to 17% in 2007).
India is one of the few markets expected to post an acceleration from 2007 growth.

Economic indicators are the biggest source of variability within the forecast. Any further weakening of the U.S. economy in the coming weeks, including recessionary conditions, could force IT market growth even lower. On the upside, a quick recovery for the U.S. and global economy may elevate expectations for the second half of this year.

"The economy is a big source of unpredictability at the moment, but most current indicators are pointing downwards," said Anna Toncheva, economist at IDC. "The government stimulus package will not have a dramatic influence on IT investments this year, and we are still awaiting the impact of more subprime mortgages resetting at higher interest rates in the next six months."

About this study

The IDC study, Worldwide Black Book Q4 2007 (IDC #210768), analyzes market trends and conditions in 54 countries around the world. Forecasts for 2006-2011 are provided across 20 technology sectors in each country.

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