Gartner cuts IT spending forecast after Euro slide

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Gartner cuts IT spending forecast after Euro slide

Microscope contributor

Gartner has downgraded its forecast for global IT spending due the slide of the Euro against the US dollar and public sector austerity measures.

The market watcher initially predicted growth of 5.3% in 2010 but the devaluation of the Euro in recent months, reaching a low of $1.19 in June, has forced a rethink with Gartner now expecting a rise of 3.9% to $3.2tr.

"The European sovereign debt crisis is having an impact on the outlook for IT spending," said Gartner research vice president Richard Gordon.

The dollar had rallied against the failing European single currency in Q2, "and this trend will likely continue in the second half of 2010, which will put downward pressure on US-dollar-denominated IT spending growth," he added.

IT suppliers in the UK and across much of Europe are bracing themselves for severe cuts in public sector spending as Governments in the region try to get a handle of budget deficits, which may also dampen demand in the commercial space.

Gordon said: "Private sector economic activity will also likely be hindered because of the direct impact of austerity measures on key government suppliers and the indirect impact caused by the ripple effect". 

Broken down by sector, hardware spending is forecast to grow 9.1% on last year to $363bn, fuelled by a "healthy PC sector" - which represents two thirds of spending - as businesses replace ageing fleets and adopt Windows 7.

However, demand for software, services and telecommunications will be more directly impacted by the currency movements, the analyst added.

"CIOs are seeing only marginal increases in budgets and are constrained to essential enterprise IT spending with discretionary spending still on hold," said Gordon.

"In the consumer sector, confidence is improving, although consumers are still wary of the threat of unemployment," he added.

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