Katrina Hits IT Spending

UPDATED: The prospect of higher oil prices following Hurricane Katrina is expected to have a short-term damaging effect on expected IT spending among businesses, reports research firm IDC Tuesday.

IT and line-of-business expectations for IT spending over the next 12 months fell from last month’s 6.1 percent to 2.9 percent, analysts at the Framingham, Mass., firm note, though they say it will eventually rebound.

According to IDC officials, the results of its latest FutureScan report — which measures expectations for future growth in the next 12 months — is the lowest since the firm started tracking IT spending expectations in early 2004.

That’s bad news for the tech industry, which has been quick to lend what aid it could for businesses impacted by two devastating hurricanes in the space of two months.

While the numbers are bad for vendors, analysts don’t expect the dip to linger indefinitely.

“This looks like a visceral reaction to Katrina from our survey population of executives,” John Gantz, IDC chief research officer, said in a statement. “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.”

IDC’s forecasting numbers are predicated on gasoline prices remaining under $3 a gallon, but that could change if home heating oil and natural gas bills jump. A cold winter might create a cascading effect as consumer spending and confidence falls, similarly affecting business IT spending, the report notes.

Profit forecasts and a lower U.S. gross domestic product, the measure of national income and output, are behind a similar drop in macroeconomic indicators, the report shows.

IDC predicts IT spending over the next 12 months at just under 5 percent.

According to an IDC spokesperson, while the report only mentions Hurricane Katrina, it also takes into account the after-effects of Hurricane Rita, which tore through the Southwest last month.

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