Spending fell 2 percent in fiscal 2005 to US$16.5 billion, down from $16.8 billion in fiscal 2004, according to Input.

The declined followed a five-year period of increases averaging more than 15 percent a year, Input said.

'It's consistent with what we have seen across all levels of government, which is a general downturn in the purchase of hardware,' said James Krouse, acting director of public sector market analysis at Input.

'Governments are continuing to look more strategically at technology as an investment and the business models don't favor purchasing equipment and eating depreciation. So in some cases it shifts even more emphasis toward outsourcing non-core competencies.'

The decrease in equipment spending through 'Schedule 70' contracts may have also been caused by a shift in purchasing to other federal contract vehicles, the report said. Or it may indicate that demand for IT equipment by U.S. government agencies may be dropping due to capacity issues or infrastructure consolidation,.