IDC FUTURESCAN NOVEMBER. The lowest expectation for future 12-month spending
This month’s IDC FUTURESCAN seems to show that the impact of Katrina and higher oil prices has created more than a one-time blip in IT spending expectations. This is the lowest expectation for future 12-month spending since we started tracking it in support of IDC FutureScan in the beginning of 2004.
This pessimism, which fits well with the University of Michigan’s Consumer Sentiment Index, which dropped in October to 74.2, it’s lowest point since 1992, comes despite reports that the U.S. economy in the third quarter grew 3.8%.

The macroeconomic indicators dropped a mere point – and mostly mirror the flat U.S. stock market and modest GDP and profit growth expectations for 2006.

As often is the case when these two indicators diverge, IDC’s forecast for U.S. IT spending growth over the next 12 months falls between the two.

Our monthly caveat: IDC believes that no single measure can confidently predict future IT spending, but that a combination of supply side, demand side, and macroeconomic indicators is required.







History

Market indicators and demand-side indicators diverged again this month, presumably because of the reaction of surveyed executives to Hurricane Katrina, Rita, and the realization that oil prices wouldn’t be coming down any time soon.

This reaction compares to that of the economy as a whole, which is not expected to be materially affected by the hurricanes. Since the market indicators are a market basket of measures less dependent on psychology-of-the-moment – they tend to show a more muted reaction.

Because the buyer intent metric is based on survey results and is simply an opinion of the sample at the time, we feel that it is likely to be more volatile than the market indicators. Keep this in mind using these metrics.
We also expect it to rebound next month – although we expected to to rebound this month, as well. The market indicators should hold firm.



Buyer Intent History:

Line of business executives saw their expectations for future IT spending lower six out of the last seven months – despite other survey data from IDC showing how much more they see IT as mission critical than ever before. The most recent drops are most likely a reaction to the reality of permanently higher oil prices.

Although this month’s surveyed CIOs seemed to be a little more optimistic, nevertheless only twice before have the results been this low – last month and in January of 2004.

Again, we don’t expect this pessimism to keep up. The economy is not that bad and oil prices have started coming down. Companies are still making a profit.

Remember that these surveys, although they are projectable samples weighted by IT spending by size class, are administered to different executives each month. Also, each month we advance the forecast horizon by a month. Thus we tend to see more variance month to month in the surveys than in the macroeconomic indicators.



Market Indicators History

This month’s market indicators continue their flat trajectory. About the only interesting thing about them is their congruence and the fact that they are higher than buyer expectations.

Based on current GDP and profit forecasts – which are lower for 2006 than 2005 – we expect the macroeconomic indicator to drift slowly down, unless the stock market does something radical. Interest rates are rising, but in a predictable way.

IDC’s forecast for IT spending in the U.S. over the next 12 months is much closer to that indicated by the macroeconomic indicators than the buyer expectations.