IDC has announced the fifth consecutive lowering of its 2023 forecast for worldwide IT spending as the global economy weakens. The analyst company now predicts that overall growth this year will be 4.4% at $3.25 trillion, down from the 4.5% it had predicted last month and the 6% it predicted in October 2022.
With inflation being at very high levels over the last year or so, central banks have responded by raising interest rates. This has, in turn, put pressure on businesses to reduce spending as the cost of borrowing is higher. As a result, the desire to upgrade IT systems has fallen. With inflation hurting ordinary consumers, demand is also weaker there too.
Commenting on the revised forecast, Stephen Minton, vice president of IDC’s Data & Analytics research group, said:
“Since the fourth quarter of last year, we have seen clear and measurable signs of a moderate pullback in some areas of IT spending. Tech spending remains resilient compared to historical economic downturns and other types of business spending, but rising interest rates are now impacting capital spending.
The most significant impact remains concentrated in consumer markets with consumer IT spending now forecast to decline by 2% this year. This will be a second consecutive year of declining consumer tech spending, a huge change in fortunes from consumer growth of 18% in 2021. On the other hand, enterprise demand for cloud and digital transformation remains strong despite economic headwinds.”
It’ll be interesting to see whether IDC is forced to further revise its estimates for worldwide IT spending in the coming months. There is currently an inverted yield curve which means the yield on long-term US debt is lower than that of short-term debt. When a yield curve inverts, it’s a strong predictor of a recession within the next two years – if one does come along, this could affect IDC’s prediction.