On 30 January 2008, the U.S. Commerce Department reported that the U.S. gross domestic product increased at an annual rate of just 0.6% in the fourth quarter of 2007. By comparison, during the third quarter of 2007, GDP grew at an annual rate of 4.9%. 
To paraphrase Nobel prize-winning economist Robert Solow, concerns about how a potential U.S. recession in 2008 will negatively affect IT seem to appear in many places, except in the economic data. Therefore, while a recession may still hit the U.S., we as yet see no evidence that IT spending — especially new IT capital spending — will experience negative growth in 2008. Current economic concerns center primarily on a sharp reduction in “Personal Consumption Expenditures” (consumer spending), which accounts for roughly two-thirds of the U.S. economy, born principally from mortgage payment delinquencies, mortgage defaults, home foreclosures, falling housing prices and rising credit card debt and delinquencies. However, recent monetary, fiscal and political actions — combined with the knowledge that neither of the two U.S. recessions in the past quarter century lasted more than eight months — may all have a softening affect on economic times ahead. We did not see negative growth in any of the “Information Processing Equipment and Software" components of GDP for either 3Q07 (the quarter prior to the suspected recession) or for 4Q07. We do see meaningful declines in the GDP categories of home construction and personal consumption, but growth in new enterprise IT spending has only slowed — not gone negative. So far, these findings are consistent with the Gartner 2008 CIO survey of 1,500 CIOs (just completed during 4Q07), which projects a 3.3% increase in their budgets compared with 2007 levels. As a double-check, we will poll the same people who participated in this to determine if there have been any changes to their 2008 IT budgets since their original survey responses to us in 4Q07. We firmly believe that almost no good comes from playing the recession guessing game. However, we do believe that great value comes from informing clients in a timely fashion about all forces that will influence the IT industry and its practitioners. We will update our view of how the IT industry will fare in the economic times ahead as circumstances change and new information is revealed. We know this current view could prove to be incorrect within days or even hours as a galaxy of issues and facts are uncovered and disseminated. But for right now, new enterprise IT spending in the U.S. is not on a path toward negative growth. Stay tuned.
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