Tech Spending to Decline in the U.S., Says IDC

This IDC announcement isn’t too surprising. With all the turmoil in the U.S. economy and many big companies filing for bankruptcy, it had to hit demand for technology. Historically, tech spending is tightly correlated to earnings of the S&P 500. And with earnings coming down, that means tech spending is going to take a hit.

We saw this during the dot com bust and we’re seeing it again. The only question is: Will tech spending take a bigger hit than during the dot com bust or not? My educated guess is that won’t be as worse since last time around the implosion was centered around tech. This time the industry is taking collateral damage. It’s the source of the storm.

The numbers support my hypothesis. Even though IDC forecasts about a 1% drop in U.S. tech spending in 2009, during the dot com and telecom bust, US tech spending declined 6% in 2001 and 5% 2002. Let’s hope IDC does not roll out another lower revision.

The silver lining is that IDC still expects tech spending to grow globally.

IDC Expects Worldwide IT Spending Growth to Slow Significantly, But Remain Positive, in 2009

FRAMINGHAM, Mass., November 12, 2008 – Worldwide spending on information technology will slow significantly in 2009 as a direct result of the global financial crisis that began in September 2008. According to a newly revised forecast from IDC, worldwide IT spending will grow 2.6% year over year in 2009, down from IDC’s pre-crisis forecast of 5.9% growth. In the United States, IT spending is expected to decline to 0.9% in 2009, much lower than the 4.2% growth forecast in August.

Here’s the full press release.

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