October 13, 2006 (updated May 4, 2007)

US IT Spending Summary: Q2 2006

Revised 2004 And 2005 Data Lowers Forecast; SMBs Expand IT Spending

by Andrew Bartels

with Ellen Daley, Heidi Lo

Executive Summary (This is a document excerpt)

US GDP data for Q2 2006 contained a surprise for the tech market: The US Department of Commerce made major downward revisions to its estimates for US business investment in information technology goods for 2004 and 2005. These revisions reduced growth rates for IT investment and IT spending in both years from our earlier estimates and dampen our forecast for 2006 and 2007. In addition, as we expected, the Q2 2006 data from both US government and vendor sources showed slowing growth of 6% and 4%, respectively. We now expect that 2006 overall growth in investment will be 6% to 8%, with a sharp slowdown for 2007. Our IT spending forecast (with depreciation on capital investment) estimates 6% growth in 2006, slowing to 3% in 2007. Spending by small and medium-size businesses (SMBs) will grow slightly faster than enterprise spending, inching up the SMB share of US IT spending to almost 48%.

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