Positive End to 2002 for German IT-Related Service Providers

Turnover growth stabilised in the German sector of IT-related services at the end of 2002. The annual rate of growth in turnover increased to 2.1 percent in the fourth quarter 2002 from 1.4 percent in the previous quarter.

Still, the enterprises of this sector are becoming more insecure. Particularly with regard to the future trend of demand they are more pessimistic than they have been in the year so far.

This is the result of a business survey among IT-related service providers that the Centre for European Economic Research (ZEW) and the credit reference agency Creditreform conducted in November and December 2002. 1200 enterprises participated in this survey. The sector of the IT-related service providers consists of the Information and Communication Technology (ICT) service providers (enterprises of the branches computer ser-vices and -leasing, ICT-specialized trade as well as telecommunication services) and knowledge intensive service providers (enterprises of the branches tax consultancy and accounting, management consultancy, architecture, technical consultancy and planning, research and development as well as advertising).

The favourable ending of the year 2002 is, however, restricted to the West German IT-related service providers. In the fourth quarter of 2002 their turnover growth rate lies at 2.7 percent (previous quarter 2.0 percent). The situation of the East German enterprises has not changed compared to the third quarter. Their annual rate of growth in turnover remains at 0.2 percent.

Traditionally stronger in growth, the ICT branches reach the turnover growth level of the second quarter of 2002, with a rate of growth of 3.2 percent. The knowledge intensive branches have an annual rate of growth in turnover of 1.0 percent in the fourth quarter of 2002 (0.8 percent in the third quarter). The branches research and development as well as computer services and -leasing show the highest share of enterprises that increased their turnover as compared to the third quarter of 2002.

The German IT-related service providers do not expect the current halt of the economic downturn to be already the cyclical turning point everyone is longing for. As there is still no sign of macroeconomic improvement, they have instead lowered their expectations for the near future. Compared to the previous quarter, the balance of positive and negative expectations concerning all cyclical indicators (turnover, return, demand, personell and prices) dropped in the fourth quarter of 2002.

Also, the continuing reduction in employment in the German IT-related services sector indicates that the enterprises do not deem the current stabilizing of turnover an indicator for a longterm economic revival. More than half of the turnover in the sector was obtained by enterprises which economised on personell. The turnover share of enterprises which expanded their workforce is now only around 12 percent (previous quarter 30 percent). Enterprises with a turnover share of more than 40 percent expect to reduce their workforce in the first quarter of 2003.

Contact

Dr. Margit Vanberg,  E-mail: vanberg@zew.de