IT Spending Could Slump Due To Oil Prices, Rising RatesIT Spending Could Slump Due To Oil Prices, Rising Rates

Although IT spending during the first quarter of 2005 met expectations, uncertainty about oil prices, interest rates, and currency fluctuations will likely drop the rest of the year's expenditures to the low end of estimates, a research firm said Wednesday.

IDC pointed to Europe as a particularly troublesome area, with worsening economic conditions already forcing some large firms to back off major IT purchases. Western Europe's IT market is now expected to grow by just 4 percent during 2005, slightly lower than the 5 percent growth still anticipated in the U.S.

While IDC's analysts expect IT spending growth to slightly outpace GDP (Gross Domestic Product) growth, and are bullish on areas such as China and Russia, and on expenditures in the networking and communications areas, the mixed signals it's seeing may mean trouble.

"High oil prices and exacerbated protectionist pressures in the U.S. and Europe recently raised the risks of abrupt currency adjustments and a further increases in U.S. interest rates," said Anna Toncheva, an economist in IDC's IT markets group, in a statement. "Such a reversal in the economic environment will undermine IT spending plans and pose a threat to the stability of the IT market."