Forecast Report

Government Spending Brinksmanship Drags Down The 2013 US Tech Market Outlook

We Cut Our 2013 Spending Growth Estimate To 3.9% From 5.7%

October 25th, 2013
With contributors:
Christopher Mines , Joanna Clark

Summary

By rights, US CIOs should be looking at a relatively decent 6% growth in their tech purchases in 2013, as we had predicted earlier this year. Instead, the drag on the US economy and on US tech buying due to sequestration's across-the-board cuts in federal spending, the two-week federal government shutdown, and the last minute increase of the federal debt ceiling have kept the US economy and US tech market stuck in second gear. While the private sector has been growing at annualized growth rates of 2% to 3%, government spending has been declining. Although the congressional compromise to reopen the federal government and raise the debt ceiling through January 2014 removes the immediate risk of a worldwide financial crisis and economic recession, business caution about renewed deadlock will constrain economic growth and tech buying for the rest of the year. As a result, we have reduced our 2013 forecast for US business and government purchases of information and communications technology (ICT) goods and services to 3.9%, from our 5.7% growth forecast earlier this year. Our revised forecast continues to show strong growth in software, especially, software-as-a-service (SaaS) and analytical and collaboration apps; IT consulting and systems integration services; and communications equipment, but we also see weakness in computer equipment, IT outsourcing, and telecom services.

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