Confidence In Economy Rises, Now What About I.T.? - InformationWeek

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Confidence In Economy Rises, Now What About I.T.?

More business-technology executives today see the U.S. economy heading in the right direction than did three months ago, but companies aren't translating that optimistic outlook into more spending on IT, InformationWeek Research's quarterly IT Confidence Index shows.

The IT Confidence Index, released this week, hit 889 in June, up 17.4% from March. March had the lowest number recorded since InformationWeek Research created the index in March 2001 to track business-technology executives' attitudes toward economic issues that shape IT spending plans. The index is down 36% since its inception.

chartThere's a substantial change in attitudes toward the economy from March's index, when the prospect of war hung over the United States. Half of the 300 execs surveyed have a positive outlook about current economic conditions, up from 34% in March. Only 7% express a negative view, down from 19% three months ago. Looking ahead three months, only 39% express a positive outlook, but that's up from 21% in March. Still, it's not surprising capital investments in technology haven't spiked. "There's a real lag time," says Gene Huang, FedEx Corp.'s chief economist. "This bodes well for the future."

Beyond the end of large-scale war in Iraq, Creighton University economics professor Ernest Goss cites a rebounding stock market and the declining value of the U.S. dollar--which helps U.S. exports--as causes for optimism. Also, industrial production and capital utilization rose slightly in May.

Yet only 31% of executives are optimistic about their companies' IT budgets and spending plans. David Levy, chairman of the Jerome Levy Forecasting Center, says companies with improving cash flow are using it to "repair their balance sheets" rather than invest. But looking three months out, 32% of survey respondents expressed a positive view of their companies' tech spending. FedEx's Huang says IT spending will increase because companies need to replace older technology. But he warns that this will lessen the incredible leverage IT buyers have had recently. "The pricing environment is improving for computer and peripheral equipment makers," he says. That, like economic optimism, is a sentiment that hasn't been heard in a while.

For an interactive look into the index since its inception, please visit our IT Confidence Index Tracker.

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