Positive Economic Development Continues in the German IT-Related Services Sector

From now on the ZEW will be releasing a quarterly sentiment indicator for the IT-related service providers. The new indicator, ZEW-IDI, is based upon the ZEW/Creditreform business survey among enterprises that belong to this sector.

It reflects the estimation given by the interviewed firms with regard to the economic situation in this important part of the services sector (please refer to the additional information concerning the ZEW-IDI at the end of this press release). The value of the ZEW-IDI is 58.4 points in the fourth quarter of 2003. The partial indicator for the current business situation, as reported by the interviewed firms, is 52.7 points in the fourth quarter of 2003. The partial indicator for business expectations for the first quarter of 2004, as reported by the interviewed firms, is 64.8 points. The fact that the value of the partial indicator for the current business situation of 52.7 points is a little above the 50 point value, points to a moderate increase in business activity in the fourth quarter of 2003. Considering that in the third quarter of 2003 the economic situation of the German IT-related service providers started to recover, the interviewed firms assess the stabilisation of turnover and demand in the fourth quarter of 2003 positively. The majority of firms expects that demand conditions will improve in the first quarter of 2004 and that this will, as a consequence, influence turnover and profit positively.

This is the result of a business survey among German IT-related service providers that the Centre for European Economic Research (ZEW) and the credit reference agency Creditreform conducted in November and December 2003. 1,000 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 services and leasing, ICT-specialised 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).

There are no signs of improvement in the employment situation within the sector of IT-related service providers. In the fourth quarter, the balance of positive and negative employment changes remains negative, and the enterprises, on average, also do not expect any positive changes concerning their number of employees for the first quarter of 2004. As long as the uncertainty over whether the current economic upward trend will give way to a sustainable upswing persists, enterprises tend to refrain from hiring new employees. In the fourth quarter, the turnover share of those enterprises which had reduced staff was highest with architects, advertising agencies and telecommunications service providers. The majority of architects and technical consultants and planners, both dependent on the building trade, expects that they will have to dismiss further staff in the upcoming winter months. The advertising agencies and telecommunication services expect a rise in demand for their services in the first quarter of 2004 which would allow them to at least keep their employment number at a stable level.

Tax consultants and accountants were the branch with the most dynamic sales trend in the fourth quarter of 2003. More than half of the turnover of this branch was generated by enterprises who report increased turnover compared to the third quarter of 2003. The positive turnover trend and the tax consultants' and accountants' expectations that demand and turnover will rise again in the first quarter of 2004 had a positive effect on employment in this branch. The tax consultants and accountants of all branches report the highest share of turnover of enterprises that have employed personnel in the fourth quarter of 2003. The situation in computer services and leasing was also positive in the final quarter of 2003. The demand for IT-services increased strongly in the fourth quarter compared to the previous quarter.

Additional information on the ZEW Indicator of IT-related service providers (ZEW-IDI)

The ZEW-IDI is calculated on the basis of the four following components: current turnover and demand, as well as expected turnover and expected demand (each compared to the preceding respectively succeeding quarter.) All of them are weighted equally in the calculation. Current turnover and demand form a partial indicator which reflects the business situation. Turnover expectations and demand expectations form a partial indicator which reflects business expectations. The geometric mean of the business situation and the business expectations equals the value of the ZEW-IDI. The sentiment indicator can take on values from 0 to100. Values exceeding 50 hint at an improvement of the business situation compared to the previous quarter, values less than 50 hint at a worsening compared to the previous quarter.

Contact

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