IT-Related Service Providers - Firms Assess Business Situation More Optimistic

The ZEW-IDI, sentiment indicator for the economic sector IT-related service providers, in the second quarter 2007 has increased by 2.1 points in comparison to the first quarter 2007 and now reaches a value of 65.9 points. Particularly the partial indicator which reflects the assessment of the current business situation is responsible for this increase.

This partial indicator has increased in the second quarter 2007 by 4.4 points up to a value of 63.9 points compared to previous quarter. The partial indicator which reflects the assessment of the future business situation has decreased in the second quarter 2007 slightly by 0.4 points down to a value of 68.1 points. The current mood of firms in the economic sector remains positive despite this slight decrease. The firms in the economic sector are especially optimistic regarding the development of sales volume and demand in the third quarter 2007.

This is the result of a business survey among IT-related service providers conducted by the Centre for European Research (ZEW), Mannheim, in cooperation with the credit reference agency Creditreform, Neuss, in June 2007 (details regarding the survey are provided below).

The positive development of the partial indicator of the ZEW-IDI which reflects the assessment of the current business situation of the IT-related service providers mainly is due to the good assessment of the returns and demand situation. The percentage of firms which record increased returns outweighs the percentage of firms which record diminished returns by 4.3 points. Especially management consultants assess the returns situation favourable. More than two fifths of management consultants report increased returns. The returns of firms in the research and development branch have declined in comparison to the first quarter 2007. The percentage of firms which report diminished returns exceeds the percentage of firms with increased returns by 7.3 points. Still more than two thirds of firms in the research and development branch report unmodified returns.

Almost one third of IT-related service providers report increased demand. Moreover the good economic situation benefits employment. The employment situation has improved in comparison to the first quarter 2007. This is particularly true for firms in the software and IT services branch, where the percentage of firms which hired new staff in the second quarter 2007 outweighs the percentage of firms which released staff by 7.1 points.

The partial indicator of the ZEW-IDI which reflects the assessments of the future business situation has decreased slightly in the second quarter 2007 by 0.4 points to a value of 68.1 points. Although turnover expectations have deteriorated in comparison to the first quarter 2007 the percentage of firms which expect increasing turnover outweighs the percentage of firms which expect decreasing turnover by 18.3 points. Tax consultants and accountants are especially optimistic. More than one third anticipate that the turnovers will develop positively in the third quarter 2007. Just under 60 percent of the IT-related service providers expect an increasing demand for the third quarter 2007. This is especially true for firms in the ICT-trade. Just under two third of these firms anticipate an increasing demand in the third quarter 2007. About two thirds of IT-related service providers expect no change in profitability in the third quarter 2007. Particularly the telecommunications service providers anticipate stable returns and a stable employment situation in the third quarter 2007. More than half of technical consultants and planners and about two thirds of architects do not expect any change in their employment situation either.

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.

The business survey by ZEW/Creditreform

About 800 firms participate in this quarterly survey. The economic sector IT-related service providers comprises the Information and Communication Technology (ICT) service providers (firms in the branches of computer service and leasing, ICT-specialised trade as well as telecommunication services) and knowledge intensive service providers (firms in the branches of tax consultancy and accounting, management consultancy, architecture, technical consultancy and planning, research and development as well as advertising).

Overview of the ZEW/Creditreform business survey

Further information in german language

Remark on projection

To generate a representative analysis, the ZEW is projecting 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.

Contact

Dr. Jenny Meyer, E-Mail: meyer@zew.de