There is no one-size-fits-all answer to predicting consumer spending in a recessionary or uncertain economy, as each individual may have different priorities and strategies for managing their budget. However, some general trends that analysts tend to observe when it comes to spending are that people may hold off on major purchases – like a new car or house – in the hope of the economy picking up again soon. Additionally, people may use their savings to buy items they would not ordinarily purchase, such as fuel for their car or groceries.
In late October, Gartner released a forecast that predicted that global business and consumer spending would grow 5.1% in 2016. This would be the strongest rate of growth since 2011, and it’s an optimistic prediction considering the current global economy. Meanwhile, IDC predicts between 5% and 6% growth for both segments this year. While there is some variation in their predictions, all three experts agree that there will be a rebound in global economic activity this year, which should benefit businesses of all sizes.
Gartner expects that enterprise buyers will increase expenditures in the coming year, while expecting the drag on their predictions to come from consumer side of the ledger. This is likely due to concerns over regulation and a slowing global economy.
While enterprises continue to increase spending on digital business initiatives, many small businesses are struggling due to the global recession. This appears to be a two-sided coin, with the larger businesses able to handle increased expenses and offer new services while smaller businesses either go out of business or resort to lower quality offerings in order not to lose customers.
Rick Villars of IDC anticipates that the global IT market will grow by almost 5 percent in 2021 and by an even more impressive 9 percent in 2023. This growth is largely driven by the continuing shift to digitalization and the need for organizations to pursue faster ROI for their technology investments.
A healthy economy and stable prices will provide companies with the resources to invest in valuable, long-term IT infrastructure projects. Even if the economy improves, businesses will likely still see growth in the 5% to 6% range for IT spending due to necessity, not greed.
The Adobe Digital Price Index found prices for electronics, which include items like phones and PCs, were down over 12% for the year (with prices increasing 1.9% in December). But that was more than offset by groceries, which were up 13.5% year over year. In other words, even though electronics prices may have gone down overall, the average American consumer’s spending power stayed the same or increased because they spent more on groceries. This suggests that the squeeze on consumer spending is likely to be a major factor in slowing economic growth this year; if people can’t afford to buy cars or furniture or electronic devices outright, they’re less likely to spend money at local businesses that support their community.
Adobe doesn’t measure gasoline prices, but they fell 2% in December according to CNBC. This may suggest that consumers are feeling less confident when it comes to making big purchases like new technology. Considering fuel oil prices were up 41%, it seems that many people have been paying more overall for basics like gasoline and food. If this trend continues, it might be difficult for recent tech adopters to justify spending an excess of money on top-of-the-line devices and software when they can simply buy the same thing cheaper elsewhere.
One possible explanation for PC sales declining 4 quarters in a row is that consumers are buying other forms of technology, such as smartphones and tablets, over PCs. The 28% drop in Q4 2022 is the largest single quarter drop since Gartner began tracking this data in the mid-1990s. Consequently, PC hardware makers may have to focus on transitional products and services to keep consumers’ interest in PCs alive.
The poor performance of the phone market suggests that consumers are not interested in buying new devices. This trend is likely to continue in the future, as more and more people switch to mobile internet services and virtual reality instead.
Despite fears of a recession, enterprise spending on IT will continue to grow in 2009. This is due in part to the usefulness of technology in mitigating the impact of an economic downturn.
Technology is currently being used as a solution to many of the business challenges that a recession brings. CIOs are reporting that technology is one of the main strategies they are using to help their company survive these difficult times. However, if technology investments are not strategically managed during turbulent times, this approach may backfire and interfere with actual business operations instead.
Given the increasing number of data breaches, enterprises are going to continue to spend a high amount of money on cybersecurity in the years to come. This is evidenced by Canalys’ prediction that security spending will increase 13% in 2023. As this market continues to grow, it’s important for businesses to make sure that they have a strong security plan in place so that their data is not stolen.
As 2013 comes to a close, it is clear that electronics continue to play a critical role in the economy. Despite rising food and fuel prices, consumers are likely to think twice before buying electronics in the first part of the year. However, as businesses see technology as a critical budget item, spending looks much brighter going into 2014.