US Q2 2011 GDP Report Is Bad News For The US Tech Sector, But With Some Silver Linings

The US Department of Commerce released preliminary Q2 2011 GDP data this morning (National Income and Product Accounts -- Gross Domestic Product: Second Quarter 2011 (Advance Estimate); Revised Estimates: 2003 through First Quarter 2011), and there was not much good news in the numbers.  First, US real GDP growth came in at a weaker than expected 1.3% (see Table 1).  Equally bad, prior quarters' growth was revised downward -- Q1 2011 down to 0.4% from 1.9% earlier, and Q4 2010 down to 2.3% from 3.1% earlier.  Given the negative impact of the deadlock on raising the US Federal debt ceiling -- even if a default is avoided at the last minute -- it is hard to see US real GDP growing faster than 2% in Q3 and Q4 2011, and very possibly not much more than 1.5%.

Table 1, US Real GDP Growth Rates, Before and After July 29, 2011 revisions

 

Real GDP, annualized growth rate from prior quarter

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

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Forrester Will Lower Its Tech Market Forecast By One-To-Two Percentage Points, Depending On Federal Debt Ceiling Outcome

On Tuesday, we were ready to publish our mid-2011 global IT market forecast.  It projected 7.4% growth in the US IT market in 2011, and 10.4% in 2012.  Global growth in US dollars was forecast at 10.6% in 2011 and 7.6% in 2012, with the dollar rebounding in 2012 from its weakness in 2011;  measured in local currencies to eliminate currency fluctuations, growth was projected to be 7.8% in 2011 and 9.1% in 2012.  Our definition of the IT market included business and government purchases of computer and communications equipment, software, and IT consulting and outsourcing services -- it did not include their purchases of telecommunications services, which are declining in the US and growing slowly globally.

Our forecast did recognize three threats to economic growth, and thus three risks to our forecast: 1) a failure to reach a sensible resolution to raise the US debt ceiling and start on a path to lower budget deficits; 2) a failure of European governments to reach a sensible resolution to the Greek debt crisis that lowered the Greek debt burden and reduced the risk of a broader debt crisis that included Italy and Spain; and 3) overreaction by China and India to rising inflation that reduced their growth. 

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