IT recovery: once bitten, twice shy

US economy might be looking up

In one way or another, things are starting to look up, and the indications on Wall Street are that the economy might be recovering. With a rebound in the economy will come the inevitable and understandably wary optimism that might even cause a sustained, slight increase in IT spending.

The Commerce Department said last week that the US economy, as measured by gross domestic product, grew by 3.1%. The government economists, knowing that the economy only grew at 1.4% for both the first quarter of 2003 and the last quarter of 2002, didn't have high hopes for the second quarter of 2003, which they initially forecast to grow at 2.4%.

Some people will say that low inflation rates, low interest rates, and the Bush tax cut have kept consumers confident enough to keep spending through the recession, and they are spending at an increasing rate. What no one is saying is that many consumers can afford to do this because they are refinancing their homes at an astonishing rate and are using the money to remodel and to pay off debt.

The department said that business inventories in the US were way down, as companies were pessimistic in their future planning and therefore did not have a lot of finished goods stacked up in their warehouses. Speculation that the US economy might grow by 5% or more in the third and fourth quarters of 2003 will probably put a cautious spring in the steps of chief executives across the land. Commerce said that spending on capital equipment and software rose by 8.2% in the second quarter, higher than the 7.5% growth it had expected.

If there is an upturn in the last quarter of this year, it will be welcomed, especially after four years of IT executives predicting an upturn in spending in the second half. In the past four years, untold numbers of companies have gone bust in the second half, and the new year has started with something more like a whimper than a bang. This is why no IT executive wants to go on record in predicting an upturn, even if there is one.

Source: Computerwire/Datamonitor

Related research: Datamonitor, "Global IT & networking spend by vertical market" (DMTC0820)