Positive Economic Sentiment Due to Optimistic Business Expectations

The economic sentiment within the information economy sector has remained positive throughout the first quarter of 2014. Compared to the previous quarter, the ZEW Sentiment Indicator Information Economy has increased slightly by 0.3 points. With a total value of 64.8 points, the indicator clearly exceeds the crucial 50-points mark; undercutting this mark is a sign of impending deterioration of economic sentiment. The sentiment indicator for the entire information economy has performed on an almost constant level, which is eclipsing the opposite trends of the sub-indicators to a certain degree. The slightly weaker assessment of the current business situation is outbalanced by the optimistic expectations for the future economic development. The high figures recorded for the business situation (60.4 points) and business expectations (69.6 points) signal an ongoing positive development of the business situation and an optimistic outlook for the information economy. These are the findings of a survey conducted by the Centre for European Economic Research (ZEW) among representatives from the information economy in March 2014.

The information economy sector consists of the sub-sectors information and communication technologies (ICT), media service providers and knowledge-intensive service providers. In the ICT sub-sector, the business climate has remained positive. The sentiment indicator stands at 70.3 points, only 0.1 points below the value recorded in the previous quarter. The sub-indicator for business expectations has grown by 8.8 points compared to the fourth quarter of 2013, reaching an impressive level of 75.8 points. The sub-indicator for the business situation, by contrast, has lost 8.9 points, but is still maneuvering at a relatively high level of 65.1 points. The sub-indicators for the current business situation and business expectations show oppositional trends in the sub-sectors of ICT service providers and ICT hardware companies, too.

In the media sector, the bleak economic sentiment has hardly improved. Even though the sentiment indicator has increased by 0.1 points to 49.7 points, it has missed the crucial 50-points mark. The media service providers still assess the economic development to be slightly negative. The business situation sub-indicator has declined by 15.3 points compared to the previous quarter, reaching a value of 47.4 points. The majority of media service providers feel that the business situation has deteriorated since the fourth quarter of 2013. When it comes to business expectations, the sub-sector is more optimistic. The corresponding sub-indicator has increased from 39.2 points in the previous quarter to 52 points and has thus passed the 50-points mark.

The prevailing optimism among knowledge-intensive service providers has further improved in the first quarter of 2014. The sentiment indicator for the entire sub-sector has increased by 0.9 points to 64.2 points. The business expectations sub-indicator (68.9 points) clearly outstrips the business situation sub-indicator (59.7 points). However, the latter indicator still reflects a positive business situation for knowledge-intensive service providers. PR- and business consultants are the most optimistic sub-sectors among the knowledge-intensive service providers.

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

The ZEW Sentiment Indicator for the Information Economy

The Economic Sentiment Indicator for the Information Economy is composed of four components: turnover situation, demand situation, turnover expectations, and demand expectations (each in comparison with the previous and the following quarter). They are used for the calculations with equal importance. Turnover situation and demand situation form a partial indicator reflecting the business situation. Turnover 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 of 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 ZEW Business Survey in the Information Economy

About 8,000 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, auditing (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. All nine sectors combined 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.

Comment on projection

To ensure the analyses' representativity, ZEW projects the answers of the survey participants with the turnover value of the businesses with regard to the entire economic sector service providers of the information society. The phrasing "share of the businesses" thus reflects the share of turnover of the businesses.