Forecasting spending is a tricky business, especially in a period of economic uncertainty. Perhaps that’s why both IDC and Gartner have lowered their fall forecasts for the new year, with Gartner now forecasting modest 2.2% growth for 2023, while IDC is slightly more optimistic at 4.4%.
In the fall, Gartner predicted a much more robust 5.1% and IDC was looking at between 5% and 6%. Both companies look at a combination of business and consumer spending in their figures.
Gartner says it’s the consumer side of the ledger that’s hampering their forecasts, while the company expects business buyers to increase spending over the next year.
“As inflation wreaks havoc on consumer markets and contributes to layoffs at B2C companies, companies continue to increase spending on digital business initiatives despite the global economic slowdown,” Gartner analyst John-David Lovelock said in a statement.
When we spoke to IDC analyst Rick Villars for an article on 2023 spending, he left some leeway in his forecast:
“Expenditure on core IT infrastructure, enterprise software, professional services to deploy and operate the systems – even if the economy remains flat, we expect continued healthy growth in the range of 5% to 6% overall for those spaces. It would take a more severe economic downturn than what we’re seeing to change that,” Villars told TechCrunch.
Pressure on consumer spending may be the cause of the problem the Adobe Digital price index found prices for electronics, including items such as phones and PCs, were more than 12% lower for the year (with prices rising 1.9% in December). But that was more than offset by groceries, which were up 13.5% year over year, a number that is likely to have a much bigger impact on consumers overall.
Gasoline prices (which Adobe does not measure) fell 2% in December (per CNBC), but heating oil rose by no less than 41%. The bottom line is that consumers are probably not confident right now when it comes to buying new technology if the base is costing them so much more than it did last year.
The figures confirm this, as PC sales fell for the fourth quarter in a row. That translated to a 28% drop for the fourth quarter of 2022, numbers so low that Gartner reported it was the biggest single-quarter drop since the company tracked this data in the mid-1990s
Phone sales were similarly dismal, with sales at their lowest in a decade. The numbers fell 17% in the fourth quarter of 2022, down 11% for the year.
While consumers are clearly cutting back, companies are less likely to cut spending because technology can help mitigate the impact of an economic downturn, something Villars told us in the December article on IT spending:
“The most important thing we’re hearing from CIOs is that technology is part of solving the business challenges posed by a recession. And if the focus is only on reducing technology investments, they’re not really helping the company through the recession or through these disruptions.”
Companies certainly won’t skimp on cybersecurity, as new data from Canalys shows. The company predicts that security spending will rise 13% in 2023.
Consumers are likely to think twice about buying electronics in the early part of the year if food and fuel prices don’t fall and that will have a big impact on the overall numbers, but as these companies predict, corporate spending will continue to rise looks much brighter as companies view technology as a critical budget item.