November 3, 2003 11:02 AM PST

Study: IT, telecom on recovery path

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The recent upturn in the U.S. economy is giving rise to hopes of a recovery in the information and telecom industries, according to a new study.

IDC said in a report Monday that better-than-expected growth in the U.S. economy will prompt spending in information technology, due to pent-up demand. However, the growth may not be to the level seen during the dot-com boom.

Higher IT spending in the United States will affect the global IT industry as well, according to the report, even though markets in Europe, Japan and Canada remain depressed. Worldwide, IDC predicted a growth of 5 percent in IT spending, taking it to $916 billion in 2004.

Spending on telecommunications services is expected to grow 4 percent to $1 trillion in the same time period. Spending on data services should grow 16 percent in 2004, while spending on equipment should rise 7 percent in 2004 and 11 percent in 2005.

"Since the end of major combat operations in Iraq, the U.S. economy and IT market have been poised for an upswing," IDC economist Kevin White said in a statement. "There are signs that business investment is now rising."

Other recent studies have given no definite indication of the fate of future IT spending. A survey of chief information officers by Merrill Lynch found that improvement in IT spending is not likely before the second half of 2004, if not 2005. A similar study by Goldman Sachs found that American businesses have continued to spend conservatively on tech during 2003 but that a modest recovery is likely in 2004.

IDC said its forecast is based on a conservative set of economic assumptions. "If the recent announcement of surging economic growth in the US is sustained, and the gradual improvement in international economies continues, we can look forward to a further uptick in IT spending expectations," said Stephen Minton, an IT spending analyst at IDC.

 

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