Our us economists believe that the us economys

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Unformatted text preview: he euro area to grow 1% in 2014 and 1.4% in 2015. Figure 4: Trend in US GDP growth Figure 5: USD revenue growth trend (based on revenues of top four Indian IT service companies) Real GDP growth Overall USD revenue growth 5.0 30.0% 3.8 4.0 2.9 3.0 2.0 3.2 2.8 1.8 1.7 25.7% 24.6% 25.0% 19.1% 20.0% 16.1% 1.1 15.0% 1.0 0.0 13.1% 12.4% 9.6% 10.0% 6.0% -1.0 7.7% 7.1% 5.0% -2.0 -3.0 CY08 -2.4 CY09 0.0% CY10 CY11 CY12 CY13E CY14E CY15E Source: National Authorities, Deutsche Bank FY10 FY11 FY12 FY13 9MFY14E Source: Company data Top four Indian IT service companies – TCS, Infosys, Wipro, HCL Tech, Figure 6: Trend in Euroland GDP growth Figure 7: USD revenue growth trend (based on revenues of top four Indian IT service companies) Euroland Real GDP growth Overall USD revenue growth Growth in revenues from Europe (yoy) (yoy %) 1.7 2.0 1.0 Growth in revenues from US geography (yoy) (yoy %) 1.5 1.0 0.6 1.4 30.0% 25.7% 25.0% 20.0% 0.0 20.0% -1.0 -0.6 -0.4 22.3% 19.1% 18.5% 14.3% 15.0% -2.0 10.0% -3.0 13.1% 9.6% 6.0% 5.0% -1.1% -4.0 0.0% -4.0 -5.0 CY08 CY09 CY10 CY11 Source: Deutsche Bank Deutsche Bank AG/Hong Kong CY12 CY13E CY14E CY15E -5.0% FY10 FY11 FY12 FY13 9MFY14E Source: Company data Top four Indian IT service companies – TCS, Infosys, Wipro, HCL Tech Page 7 7 January 2014 Software & Services Indian IT Services Figure 8: Trend in unemployment rate in the US Unemployment rate (%) 10.0 9.8 9.5 9.6 9.5 9.5 9 9.0 9.0 9.1 8.7 8.5 8.2 8.2 8.0 8.0 7.8 7.7 7.5 7.5 7.4 7.3 4QCY13E 3QCY13 2QCY13 1QCY13 4QCY12 3QCY12 2QCY12 1QCY12 4QCY11 3QCY11 2QCY11 1QCY11 4QCY10 3QCY10 2QCY10 1QCY10 7.0 Source: BLS, Improvement in the macroeconomic outlook and a drop in unemployment rates are likely to have a positive impact on the IT services spending outlook for 2014. Improving macroeconomy should impact IT service spending positively To substantiate our claim, we compare the change in the Federal Reserve’s Tech Pulse Index with changes in the US GDP growth forecast by Deutsche Bank economists. The Tech Pulse Index is an index of coincident indicators of activity in the US information technology sector. It can be interpreted as a summary statistic...
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