May 3, 2009

Finally something good: a "break in the clouds" of the economic storm


All of us have been predicting negative IT spending over the past couple of months. I guess the reason for this is because there is very little good news to talk about.

But, I see some hopeful signs in the latest numbers, as did Wall Street, where stock prices are recuperating and the graph above (from the ECONOMIST) about CFO confidence. Also Finance chiefs from the G7 powers said (last week) that the global economy may be past the worst phase of a recession although recovery was not yet assured, and they pledged to make sure that big financial firms are sound. "Recent data suggest that the pace of decline in our economies has slowed and some signs of stabilization are emerging," the G7 said in a closing communique.

The U.S. Department of Commerce, in its quarterly report on gross domestic product(GDP), said that consumer spending increased by 2.2 percent in Q1 on a sequential basis, after falling 4.3 percent in last year's fourth quarter. Consumers account for about two-thirds of overall spending in the U.S., so the first-quarter jump was seen as a good omen for the economy as a whole.

Here in Israel ,based on Bank of Israel data, we can also be a little happy that the data is showing that we hit the bottom. How long and fast are we going to recover ? I don’t know.

I thought that I would have to redo my calculations and maybe IT spending would contract more than expected. Now, I think that STKI data for this year is correct.

We know that we can forecast IT spending trends by looking at the deviation from the trend-growth of the State-of-the-Economy Index. See pictures 1, 2 and 3 .

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