Expectations about economic growth prospects and the resulting implications for tech markets have been gyrating wildly in 2010. First, there were fears that the Greek debt crisis would spread to Portugal, Spain, Italy, maybe even the UK, leading to a breakup of the euro zone and a renewed recession in Europe. Then, as worries about Europe started to ebb after Greece and other countries successfully held debt tenders, the slow pace of job growth and weak retail sales in the US sparked concerns that the US was facing a double-dip recession.

What should a tech market watcher make of this uncertainty? As I read the economic and tech market indicators, I see more news that is in line with our expectations than not; where there have been surprises, they have been more often positive than negative. Economic recoveries seldom move in a straight line, so I did not expect to see an unbroken string of good news. Moreover, because of the imbalances that caused this downturn (too much consumer spending in the US, housing bubbles in the US and several other countries, too much debt), I expected the US economic recovery in particular to be relatively weak, with real growth rates of 2% to 3%. True, European economic growth — in large part due to the effects of the Greek debt crisis — has been weaker than expected, and the euro dropped much more against the US dollar then I had assumed. On the other hand, economic growth in Asia Pacific and Latin America has been stronger than I expected, and many of the currencies in these regions have risen in value against the dollar. Lastly, the indicators of the tech market itself — both US and other government data on business investment in technology (where available), as well as the vendor data from earnings releases for calendar Q1 2010 — has generally been stronger than our forecasts.

So, we are sticking to our forecast for the global IT market. In our April 2010 report “US And Global IT Market Outlook: Q1 2010,” we predicted that global business and government purchases of computer and communications equipment, software, and IT consulting and outsourcing services would grow by 7.7% in 2010, measured in US dollars. Our current forecast in our just published “US And Global IT Market Outlook: Q2 2010” report is 7.8% growth in 2010, essentially unchanged from our earlier forecast. We have actually raised our 2010 forecast for the US IT market to 9.9% growth, up from our forecast of 8.4% in April. Adjusted for currency changes, global growth in 2010 will still be a healthy 7.3%. And we expect strong growth will continue in 2011, with 8.1% growth in the US and 8.4% growth globally in US dollars, and 8.6% in constant currencies. 

Computer equipment and software will be the strongest categories, with PCs, peripherals, and storage equipment leading the computer category, and operating system software and applications setting the pace for software. Communications equipment purchases are looking up, especially for enterprise and SMB buying. IT services growth will lag a bit, with systems integration project work waiting for licensed software purchases to rise. On a geographic basis and measured in US dollars, Canada (16.2% growth) and Latin America (15.4%) will have the highest growth rates in 2010, benefiting US vendors that sell into those regions. Eastern Europe, the Middle East, and Africa and the Asia Pacific region will also post double-digit growth of 10.5% and 11%, respectively. However, economic weakness in Western and Central Europe and the weak euro will push IT market growth in this region into negative territory (-0.7%) when measured in US dollars. Measured in local currencies, the US; Latin America (8.7%); Eastern Europe, the Middle East, and Africa (7.6%); and Asia Pacific (7.2%) will be standout regions in local currency terms, while Western and Central Europe will grow by just 2.2%.