Service Providers of the Information Society - Positive Business Sentiment Among Knowledge-Intensive Service Providers

In Germany the business situation of knowledge-intensive service providers, which include enterprises of the branches tax consultancy and accounting, management consultancy, architecture, technical consultancy and planning, research and development as well as advertising significantly improved during the second quarter 2008 compared to the first quarter 2008. The sentiment indicator for the knowledge-intensive services’ sector, based on the companies’ business expectations for the next three months and on the assessment of their current business situation reached 67.7 points. This is an increase of 7.1 points compared to the first quarter 2008. "This increase is above all due to the significant growth in demand and in turnover reported by the enterprises of the knowledge-intensive services’ sector for the second quarter 2008", says Jenny Meyer, researcher at the Centre for European Economic Research. The companies’ positive assessment regarding turnover and demand is not bound to the current situation. For the third quarter 2008 they also expect a favourable development. The partial indicator which reflects the assessment of the business expectations reached 67.4 points, an increase of 2 points compared to the first quarter 2008. This is the result of a business survey conducted by the Centre for European Economic Research (ZEW), Mannheim, in cooperation with the credit reference agency Creditreform, Neuss, in June 2008.

Contrary to the business situation of the knowledge-intensive service providers the business situation of ICT service providers deteriorated during the second quarter 2008. The corresponding sentiment indicator, which reflects the business situation of the enterprises of the branches software and IT services, ICT-specialised trade as well as telecommunication services, fell to 62.4 points. This is 3.8 points lower than the value of the previous quarter. The partial indicator which reflects the assessment of the current business situation lost 2.2 points thus falling to 58.3 points. The partial indicator which reflects the assessment of the business expectations lost 5.6 points and is now at 66.8 points. Despite this decline the value shows that the sentiment among ICT service providers is still rather positive.

The business situation of the service providers of the information society, which comprises both knowledge-intensive and ICT service providers, is considered as robust. The ZEW-IDI, a sentiment indicator for the whole sector service providers of the information society, lost 0.6 points during the second quarter thus falling to 66 points. The positive forecasts made by the service providers when they had been surveyed in the first quarter thus were confirmed during the second quarter 2008. The partial indicator which reflects the assessment of the current business situation thus increased by 0.8 points to 62.2 points.

The positive assessment of the current situation of the knowledge-intensive service providers was above all supported by management consultancies, advertising companies and enterprises of the research and development industry. Almost two thirds of the management consultancies reported an increase in demand and more than two thirds reported a growth in turnover. Almost half of the surveyed advertising companies reported an increase in turnover during the second quarter 2008 and more than half of them saw an increase in demand. In line with this trend more than half of the surveyed enterprises of the research and development industry benefitted from a growth in turnover during the second quarter 2008. About two fifths reported an increase in revenues and a heightened demand.

Although the sentiment indicator for the ICT service providers, which is derived from the business survey, declined during the second quarter 2008, the business situation of the enterprises of the branches software and IT services, ICT-specialised trade as well as telecommunication services appears to be fairly robust. Most of the telecommunication service providers reported no changes in turnover and demand. At the same time, many software and IT service providers and ICT-specialised traders reported an increase in demand. For the third quarter 2008 more than half of the ICT-specialised traders and telecommunication service providers do not expect demand to grow. A more optimistic forecast is made by the enterprises of the software and IT services industry: almost three quarters of them expect demand to grow during the third quarter.

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 software and IT services, 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). An overview of the ZEW/Creditreform business survey is provided on the ZEW project site. For further information in German language only, please consult our homepage at www.zew.de/dienstleister.

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