Government and health care are the two industries expected to demonstrate the strongest growth in IT spending this year, according to a newly released vertical-market IT spending forecast issued by San Jose-based Dataquest Inc.

According to the study, homeland security, outsourcing and agency modernization projects are expected to drive federal spending this year, while state and local governments will see their IT spending contract this year in the face of budget deficits.

Patient safety, the rising cost of managing and delivering health care and regulatory requirements such as the Health Insurance Portability and Accountability Act of 1996 are all factors expected to help drive IT investments in the health care industry.

The largest global vertical markets — financial services, manufacturing, government and communications — are expected to constitute 67 percent of worldwide business IT spending in 2003.