The US economy has been engulfed in a vicious circle that was
sparked by the dot com crash last year, research by IDC has
found.
A report by the market researcher claimed the situation had caused
the economy and technology spending to stumble. But it also
predicted things would begin to improve as the year went on and
that IT spending would increase in 2002.
"The tumbling Nasdaq triggered a vicious circle in which lower
stock values dampened IT spending and contributed to a broader
economic downturn, which in turn put further pressure on technology
spending and share prices," said senior analyst Kevin White.
The report predicted US IT spending growth would fall to seven per
cent in 2001, from 11 per cent last year. Hardware is expected to
bear the brunt of the fall, with the possibility that spending
growth could drop from 9.6 per cent last year to as little as one
per cent this year.
"Evidence suggests that software and services are more resistant to
the downturn in the economy than hardware," White revealed. He
suggested hardware might be more vulnerable because of the cyclical
nature of business investment and consumer spending on consumables.
"But the fundamentals underpinning IT investment remain strong and
this factor, along with a rebound in the economy, will restore IT
spending in 2002 and beyond," he added.
The main factors contributing to the optimism were e-commerce and
increasing Internet usage. "The expansion of their use will benefit
not only Internet companies and retailers, but also the hardware
and software vendors whose products power the Internet," White
claimed.
"Most businesses realise that technology can improve productivity
and will continue to look at the available kit and make the
investment," he added.