Computer Spending Still in Decline

U.S. busi- nesses reduced 2001 computer-related spending more than was expected before the Sept. 11 terrorist attacks and will spend less than forecast next year, a market analyst’s report said Wednesday.

Before the attacks, information-technology spending in 2001 was estimated to fall 3% from 2000, according to Giga Information Group Inc. Spending is now estimated to decline by as much as 5.3% this year and recover next year by 3.9%, the report states. Giga had previously forecast a 2002 spending increase of 7%.

Corporations cut information technology spending this year as the U.S entered a recession in March and amid concerns about the severity of the slumping economy. The attacks further undermined corporate and consumer confidence, the report said.

“It’s very clear that Sept. 11 was a major shock and affected the attitudes of those responsible for making decisions on spending,” said Andrew Bartels, Giga vice president and the report’s lead author.

The decline this year follows greater than 20% growth in business computer spending in 1999 and 2000, the report said. In 1999, U.S businesses spent about $640 billion on information technology. That rose to $792 billion in 2000, and is predicted to fall to $750 billion this year, Cambridge, Mass.-based Giga said. Spending is expected to rise to $779 billion next year, the report states.

Computer and communications hardware expenditures took the hardest hit, dropping more than 20% this year from 2000, the report states. Spending is expected to be flat next year.

Software, outsourcing, and technology consulting showed growth of less than 10% in 2001 and has the potential for a slight increase next year, Giga said.

By industry, the telecommunications, retail, computer technology, brokerage and transportation sectors cut information-systems spending the most this year, while government, health-care and services sectors increased budgets.