Spending on information technology in the US will slow sharply in 2007, claims analyst firm Forrester.

Growth rates will drop from seven per cent in 2005 - 2006 to just two per cent in 2007.

Forrester says IT spending is governed by two factors: changes in overall growth and the introduction and adoption of new technology.

Since 2001 the US has been busy adopting internet technologies which has kept spending at around seven per cent - in line with US GDP. But Forrester expects to see a sharp drop in consumer spending in 2006 or 2007 due to worries over interest rates, energy costs and a potential drop in the housing market. This will prompt a rapid drop in IT spending with decreases in hardware investment leading to cutbacks in spending on staff and services.

Forrester believes US business will react quickly to any slowdown by hacking at IT spending. However the analyst house believes IT spending will rebound quickly and start to rise again after 2008. In the period 2008 - 2010 growth will rise to nine per cent.

The firm believes there are three distinct investment periods for technology - growth and innovation and digestion.

Read the press release here.