The European Tech Market Will Grow By 1.2% In 2012 And 3.1% In 2013 – If The Euro Does Not Fall Apart

Making a tech market forecast always runs the risk of being overtaken by subsequent events.  This risk is particularly acute in Europe in June 2012, when the whole euro project hangs on the brink of potential failure.  Yet with Forrester's European CIO Forum conference occurring this week in Paris, we had to make a call on the outlook for the European tech market, rather than wait until the outcome becomes a clear. 

So, here is my assumption: the European Union and the European Central Bank will patch together a set of policies that will keep Greece in the euro, provide financing to keep Ireland, Italy, Portugal, and Spain functioning as economic reforms take hold, and offer enough stimulus to prevent something worse than the current, mild recession.  As such, in our European tech market report published today (European Information And Communications Technology Market 2012 To 2013 -- Spending Growth Comes To A Halt As Europe Slides Into Recession), Forrester is predicting that purchases of information and communications technologies (ICT) by European business and governments will grow by a feeble but still positive 1.2% in 2012 in euros, and a weak but slightly better growth of 3.1%.  Let us hope that the alternative of a euro break up, a subsequent deep recession, and a collapse of tech buying similar to that in 2009 does not make this one of the shortest lived predictions we have made.

The details of our European tech market outlook are as follows:

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Dark Clouds On The Tech Horizon Redux: Europe Drops, China And India Slow, US And Canada Limp Along

Haven't we seen this show before?  Like last year?  Once again, Europe wrestles with and is again losing against its debt crisis.  Once again, after some promising growth in late 2011, the US economy is showing signs of losing steam.  Once again, China and India are flashing distress signals.  And once again, John Boehner and the Congressional Republicans are threatening to refuse to raise the US debt ceiling unless US Federal spending is cut sharply. 

Last year, the mid-year economic troubles did take their toll on tech purchases in the third and four quarters of 2011, but a last-minute resolution to the US debt ceiling issue, the European Central Bank's aggressive lending to banks so they could buy Italian and Spanish government debt, and some strength in US consumer spending, Germany's surprisingly strong growth, and continued growth in China revived global economic growth in Q4 2011 and into Q1 2012.  Much depends on whether this pattern of slump and revival will recur again in 2012.   My bet  is that we will in fact see the same pattern. 

So, let's look at the economic evidence, and then the tech market evidence. 

  • US economy slows but continues to grow.  In the US, the US Bureau of Economic Analysis on May 31 revised down Q1 2o12 real GDP growth to 1.9% from 2.1% in the preliminary report, and on June 1 the US Bureau of Labor Statistics reported that a disappointing 69,000 increase in payroll employment in May, the second month of sub-100,000 job growth.  On a more positive note, US retailers and auto makers reported good sales growth in May, while gas prices at the pump continued to fall from peaks earlier.   My take is that we will see real GDP growth in the 1.5% to 2% range in the remainder of 2012, down from my earlier assumption of 2% to 2.5% growth. 
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