There has been much talk of a pick up in IT spending towards the end of the year. A recent survey by Merrill Lynch suggests vendors have been whistling in the wind. There is no sign from the customers that financial reins will be loosened. Many companies are insisting on keeping IT spending well below budget and see little prospect of change.

Yet the description of the survey results as showing the IT sector in recession actually demonstrates just how much good news is taken for granted. Economists generally define recession as a reduction in total output over two successive quarters. The IT recession consists of growth this year being just 2.6 per cent - not a recession at all by ordinary standards. It is, though, a considerable contrast to expectations of nine per cent growth at the beginning of this year.

Many of the vendors have been comforting themselves with claims that spending would rebound later in the year. Cutbacks have been attributed to more careful evaluation of projects, and the belief has been abroad that as studies were completed, the orders would start to flow again. But responses to the Merrill Lynch survey indicate that constraints on spending are likely to persist into next year, with perhaps some boost to spending in the second quarter of 2002.

Inevitably, slow growth in the IT sector feels like recession because it has a dramatic effect on the vendor companies. Rapid growth in revenue is achievable in booming markets, and the prospect of increased future profits drives share prices to dizzy levels. This allows executives and others to make large gains from option schemes and underpins much takeover activity.

When growth slows drastically, share prices are likely to fall, even in the absence of generally negative sentiment in stock markets. Option schemes have little or no value to managers or staff and finding investment money is generally harder. Deals can be struck between companies, but the sharp fall in Hewlett Packard's share price following its announcement of the Compaq purchase demonstrates how easily investors can undermine such grand plans.

And slow growth points up the inevitable restructuring problems that affect most sectors of the economy. In good times, few IT companies need to contract, even if they are in relatively unfavoured niches. Staff displaced from the few that do contract sharply find themselves in demand and quickly re-establish themselves.

Without rapid growth, some large companies find they have to downsize quickly to cope with changes in the products that are needed. The obvious example at present is the reduction in demand for new PCs. Again, it is evident that neither Hewlett Packard nor Compaq is in a position to find new products or services quickly enough to offset the reduction in revenues from their PC and server product lines. In the unfavourable environment of slow growth, it is much harder for displaced staff to find alternatives.

All this is a normal part of the market economy. There is no reason to suppose that the IT sector will not adapt and survive. It is, after all, still better placed than sectors that are genuinely in recession. And one day, things will get better again.