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Economic Signs Mostly Positive For IT Spending

Solution providers can look forward to solid economic growth this year, although there are a few clouds lurking on the horizon. The economy is expected to grow 3.4 percent this year, according to a survey of 51 economic forecasters by the Federal Reserve Bank of Philadelphia. If realized, this would be only slightly below last year’s 3.6 percent pace.

William Dunkelberg, chief economist at the National Federation of Independent Business, a 600,000-member small-business advocacy group in Washington, said small businesses are “very optimistic” about the economy and that sales and earnings growth this year have been “terrific.” If confidence continues into 2006, small businesses will follow through with plans for higher capital spending, including technology, he said.

There are a few economic uncertainties in areas such as interest rates and the housing market. The Fed has steadily raised interest rates throughout the year to keep inflation under control, and this has raised the cost of leasing and purchasing technology as well as the cost of floating rate loans taken out by solution providers.

CRN believes the Fed will bring the current cycle of interest rate increases to an end sometime in the first quarter of this year. The exact timing is uncertain, however, particularly with Benjamin Bernanke replacing longtime Federal Reserve Chairman Alan Greenspan on Feb. 1.

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