Debt Ceiling Debate Will Hurt U.S. IT Spending: Forrester

By CIOinsight  |  Posted 07-28-2011 Print Email
A Forrester analyst said Congress' inability to settle the ongoing deficit and debt ceiling debate will slow spending on IT both in the United States and abroad.

The ongoing debt ceiling debate in Washington D.C. and the looming threat to the U.S. economy will negatively impact the global IT market at least over the next two years, according to a Forrester Research analyst.

In a blog post July 28, Forrester analyst Andrew Bartels said the market research firm on July 26 was prepared to publish a mid-year global IT spending forecast that was going to show 7.4 percent growth in the U.S. IT market for this year and 10.4 percent in 2012. Worldwide IT spending would jump 10.6 percent this year and 7.6 percent in 2012.

Forrester's projections were taking into account three threats to global economic growth, Bartels said: Failing to reach "a sensible resolution to raise the U.S. debt ceiling and start on a path to lower budget deficits," failure for European governments to sold the Greek debt crisis, and overreaction by China and India to inflation threats in those countries.

Over the past couple of weeks, developments seem to breaking in such a way to alleviate much of these threats, he said. The European Union and European Central Bank came up with a plan to offer new financing to Greece while reducing the country's debt levels, and in the United States, President Barack Obama and House Speaker John Boehner were close to coming up with a compromise deficit plan that would raise the debt ceiling through 2012 and reduce the deficit by $4 trillion over 10 years through a combination of budget cuts and tax increases.

All this was happening while such top-tier tech vendors as IBM, Microsoft and Oracle were unveiling quarterly financial numbers that showed solid growth.

"But then things fell apart," Bartels wrote. "By Monday July 25 , the grand bargain was dead, House Republicans and Senate Democrats were scrambling to put together rival bills, and all the available options for resolving the debt ceiling increase would have negative impacts directly for the US economy, and indirectly on the global economy. And lower economic growth in turn translates to lower tech investment. So, we pulled our forecast, because it was clear the projections described above were too optimistic.

"Now, the question is how much to lower our forecast, and that will depend on what happens between now and August 2nd."



 

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