Economic Sentiment in the Information Economy Remains Positive Despite Slight Setback

Despite a slight setback, the information economy remains optimistic in the new year. This is reflected in the ZEW Sentiment Indicator for the Information Economy, which has reached a total of 64.5 points in the fourth quarter of 2013. Even though it has dropped by 1.8 points compared to the previous quarter, it is still well above the crucial 50-points mark. A value below that mark signals a worsening economic sentiment. The slight setback, which is the first in more than a year, can be attributed to an unfavourable development of business expectations for the first quarter of 2014. The corresponding sub-indicator has lost 6.1 points and now stands at 60.8 points. By contrast, the sub-indicator of the business situation in the fourth quarter of 2013 has increased to 68.6 points – most probably due to the year-end business. These are the findings of a survey conducted by the Centre for European Economic Research (ZEW) in the information economy sector in December 2013.

The sector of the information economy consists of the sub-sectors information and communication technologies (ICT), media service providers, and knowledge-intensive service providers. Optimism in the ICT branch remains broadly unchanged. The economic sentiment indicator has decreased by 1.1 points compared to the long-time high of the previous quarter, but it still ranges at a very high level of 70.4 point. The high figures of the sub-indicators of the business situation (74 points) and business expectations (67 points) indicate that favourable conditions as well as strong optimism prevail with regard to the economic development in the ICT sector. ICT service providers and ICT hardware manufacturers have a positive assessment of the current business situation and of business expectations for the first quarter of 2014.

The economic upturn in the media industry has stopped. In the previous quarter, the first positive economic sentiment in almost two years had been recorded. However, the economic sentiment indicator has dropped by 4.2 points in the fourth quarter of 2013. It has thus lost more than half of the points gained in the previous quarter and has fallen below the crucial 50-points mark to 49.6 points. This signals another deterioration of the economic sentiment among media service providers. Displaying a decrease by 30.8 points to 39.2 points, the sub-indicator of business expectations for the first quarter of 2014 has nearly been halved. At the same time, however, the sub-indicator of the current business situation has risen to 62.7 points.

The knowledge-intensive service providers remain optimistic. The sentiment indicator has hardly changed compared to the previous quarter and currently ranges at 63.3 points. Business expectations have slightly worsened, whereas the sub-indicator of the business situation has reached a total of 65.7 points, increasing for the third time in a row. The positive economic sentiment prevails across all partial sectors of the knowledge-intensive service providers. In particular PR agencies and business consultants consider the current business situation and expectations to be promising.

For further information please contact

Daniel Erdsiek, Phone +49/621/1235-356, E-Mail erdsiek@zew.de

The Economic Sentiment Indicator in the Information Economy

The Economic Sentiment Indicator in the Information Economy is composed of the four components sales situation, demand situation, sales expectations and demand expectations (each in comparison with the previous and following quarter). They are equally taken into account for the calculations. Sales situation and demand situation form a partial indicator reflecting the business situation. Sales expectations and demand expectations form a partial indicator reflecting the business expectations. The geometrical mean of the business situation and the business expectations amounts to the value of the Economic Sentiment Indicator in the Information Economy. The sentiment indicator can adopt values between 0 and 100. Values above 50 indicate an improved economic sentiment compared to the previous quarter, values smaller than 50 indicate deterioration compared to the previous quarter.

The Economic Survey Conducted by ZEW

About 5,000 businesses with a minimum of five employees participate in the quarterly survey conducted by ZEW. The companies surveyed belong to the following business sectors: (1) ICT hardware, (2) ICT service providers, (3) media, (4) law and tax consultancy, accounting, (5) public relations and business consultancy, (6) architectural and engineering offices, technical, physical and chemical analysis, (7) research and development, (8) advertising industry and market research, (9) other freelance, academic and technical activities. Combined, all nine sectors make up the economic sector of the information economy. The ICT sector consists of ICT hardware and ICT service providers. The last six sectors make up the knowledge-intensive service providers.

Overview of the ZEW economy survey (in German)

Remark on the Projection

To generate a representative analysis, ZEW projects the answers of the firms participating in the survey with their shares of total turnover realized in the sector of the German IT related service providers. The phrasing ‘share of the businesses’ therewith reflects the share of turnovers of the businesses.