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IDC's FutureScan: Katrina Hits IT Spending Expectations

FRAMINGHAM, Mass., October 4, 2005 The alignment IDC reported in the September release of IDC FutureScan fell apart this month in the wake of Hurricane Katrina and the prospect of permanently higher oil prices. In fact, the IT and line-of-business expectations for IT spending over the next twelve months fell to 2.9% from last month's 6.1%, the lowest the buyer intent indicator has been since IDC started FutureScan in the beginning of 2004.
"This looks like a visceral reaction to Katrina from our survey population of executives," said John Gantz, IDC's Chief Research Officer. "Most of the economic forecasts around the impact of Katrina seem to indicate a short-term hit to the U.S. economy in 2005, followed by a rebuilding rebound in 2006. As this news gets absorbed by IT and business executives, we expect their IT spending expectations to recover."

Gantz pointed out that the macroeconomic indicators fell as well, but more as a function of lower GDP and profit forecasts for 2006 over 2005 than any short term reaction to Katrina. IDC's own forecast for U.S. IT spending over the next twelve months is just under 5%.

"We do believe the situation is more volatile than it has been in months past," noted Gantz, "specifically around the potential for oil and gas prices to rise. For our own forecasting purposes, we are assuming that the price of gasoline in the U.S. will stay under $3.00, but we are IT market analysts, not oil and gas, or weather analysts. If prices go much higher than that, or high natural gas and home heating oil prices collide with a cold winter, then we might see a cascade effect as consumer spending and confidence falls, affecting business results and affecting IT spending."

FutureScan is a set of market metrics that measure supply and demand in the IT industry based on leading indicators and customer surveys. Values reflect expectations of future growth, with an index value of 1000 indicating zero growth and each additional 10 points representing roughly 1% of expected growth or contraction.

For October, Buyer Intent, which reflects market demand for IT products and services over the next 12 months, fell to 1029, down from 1061 in September. Meanwhile, the Market Indicators number, which combines input from economic and IT industry revenue forecasts, dropped to 1058 from 1064.

FutureScan results for October and prior months can be viewed at www.idc.com/futurescan.

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