Largely Positive Business Expectations in the Information Economy

In mid-2018, the economic sentiment among companies in the information economy are widely positive, as are expectations for the third quarter of 2018. This assessment is based on the latest reading from the ZEW Economic Sentiment Indicator for the Information Economy, which reached a level of 66.6 points in the second quarter of 2018. Compared to the previous quarter, the sentiment indicator has risen by 1.5 points. The sentiment indicator is the result of a survey conducted among firms in the German information economy by the Centre for European Economic Research (ZEW), Mannheim, in June/July 2018.

The increase in the sentiment indicator was driven by the positive development of the sales situation in the second quarter of 2018. Nearly 46 per cent of businesses saw an increase in turnover compared to the previous quarter, while just under 13 per cent experienced declining turnovers. The vast majority of companies are also satisfied with the demand situation. Consequently, the sub-indicator for the business situation climbed 4.6 points, reaching a total of 66.3 points. Expectations for future economic development fell slightly by 1.8 points, though they remain at a high level. The corresponding sub-indicator for business expectations currently stands at 66.9 points. On balance, around 38 per cent of the surveyed firms anticipate rising revenues in the third quarter of 2018, while 30 per cent expect demand for their products and services to go up. The information economy consists of the sub-sectors information and communication technologies (ICT), media service providers and knowledge-intensive service providers.

The economic mood among ICT firms has changed little compared to the previous quarter. With the sentiment indicator increasing slightly by 0.1 points to 72.3 points, the majority of the ICT firms have remained optimistic with regard to their assessment of the economic situation. The sideways movement of the sentiment indicator, however, was driven by a reverse trend of the two sub-indicators. The sub-indicator for the business situation improved in the second quarter of 2018, whereas business expectations deteriorated in the third quarter. The sub-indicator for the business expectations fell by 6.6 points compared to the previous quarter. With a current reading of 71.7 points, the indicator remains, however, clearly above the critical 50-point mark, indicating that the majority of companies are still optimistic about future economic development. The optimism among the companies of the ICT sector is also reflected in the positive development of the sub-indicator for the business situation in the second quarter. Gaining 6.4 points compared to the previous month, the sub-indicator now stands at 73.0 points.

Only a small majority of media service providers are optimistic

The economic mood among media service providers has changed little compared to the previous quarter. This is reflected in the sentiment indicator, which dropped 0.7 points, but still remains just above the critical 50-point mark with a reading of 50.7 points. This indicates that only a small majority of media service providers gave a positive assessment of the economic mood. This predominantly optimistic mood can be attributed to the positive development of business expectations for the third quarter of 2018. The corresponding sub-indicator currently stands at a level of 58.7 points, an increase of 2.5 points compared to the previous quarter. In this quarter, the media service providers are particularly optimistic about sales expectations. More than half of all firms are expecting an increase in turnover, whereas only 25 per cent anticipate losses in revenues. In contrast, most media service providers gave a pessimistic assessment of the current business situation. The corresponding sub-indicator for the business situation currently stands at a level of merely 43.9 points.

The economic mood among knowledge-intensive service providers has improved slightly in the second quarter of 2018. In the previous quarter, the sentiment indicator among knowledge-intensive service providers was somewhat dampened. After climbing 2.3 points, the indicator has reached a solid level of 65.0 points. The companies’ assessment of both the business situation and expectations have also developed positively compared to the previous quarter. The two sub-indicators are currently on an equal footing and, like the sentiment indicator, have reached a total of 65 points.

For more information please contact

Dr. Daniel Erdsiek, Phone +49 (0)621/1235-356, E-mail daniel.erdsiek@zew.de

The Economic Sentiment Indicator for the Information Economy

The Economic Sentiment Indicator for 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 factored into the calculations. Sales situation and demand situation form a sub-indicator reflecting the business situation. Sales expectations and demand expectations form a sub-indicator reflecting the business expectations. The geometrical mean of the business situation and the business expectations is the value of the ZEW Economic Sentiment Indicator of the Information Economy. The sentiment indicator can take on values from 0 to 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.

ZEW Business Survey in the Information Economy

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. Sub-sectors 4 to 9 make up the knowledge-intensive service providers. You can find an overview of the ZEW Business Survey in the Information Economy (in German) at www.zew.de/konjunktur.

Remark on the projection

To ensure that the analyses are representative, ZEW projects the answers of the survey participants with the sales value of the businesses with regard to the entire sector of the information economy. The phrasing "share of the businesses" thus reflects the share of sales of the businesses.