Good Economic Climate and Optimistic Expectations

The economic sentiment for the third quarter as well as the expectations for the fourth quarter of 2018 among businesses in the German information economy continues to be positive, as suggested by the ZEW Economic Sentiment Indicator, which rose by 4.6 points to a current reading of 71.2 points (Q2 2018: 66.6 points). This means that a vast majority of the companies in the information economy evaluates the economic situation positively. The ZEW Economic Sentiment Indicator is the result of a survey among companies in the German information economy, conducted by the Centre for European Economic Research (ZEW), Mannheim, in September 2018.

The companies’ assessment of both the business situation and business expectations have also developed positively compared to the previous quarter. The sub-indicator reflecting the companies’ expectations for the fourth quarter of 2018 has experienced a particularly positive development, recording an increase of 7.4 points compared to the previous quarter. With a current reading of 74.3 points, the indicator thus remains clearly above the critical 50-point mark, indicating that the majority of firms are optimistic in their assessment of the business expectations. A total of 60.2 per cent of companies expect to see an increase in turnover in the fourth quarter of 2018. In contrast, the share of companies anticipating decreases in turnover is merely five per cent. The business situation in the third quarter of 2018 has also improved slightly compared to the previous quarter. The corresponding sub-indicator has climbed 1.9 points to a current value of 68.2 points.

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 continued to improve in the third quarter. The sentiment indicator has increased by 6.4 points compared to the previous quarter, reaching a current total of 78.7 points. The business expectations in the ICT sector have been particularly positive. On balance, around 78 per cent of the surveyed firms anticipate rising revenues, while 55 per cent expect demand for their products and services to go up in the fourth quarter of 2018. As a result, the sub-indicator for the business expectations has climbed 11.6 points, reaching 83.3 points – its highest level in a long time. The increase recorded by the sub-indicator for the business situation is somewhat lower. Already at a high level, the corresponding sub-indicator climbed an additional 1.4 points to 74.4 points.

Very positive mood among media service providers

The economic mood among media service providers has improved considerably compared to the previous quarter. Following an increase of 3.6 points, the sentiment indicator now stands at 54.3 points, exceeding the critical 50-point for the first time in a year. This optimism can be attributed to the companies’ expectations regarding future business developments, which improved considerably compared to the previous quarter. The corresponding sub-indicator for the business expectations has climbed 4.6 points to a current value of 63.3 points. A total of 28.4 per cent of media service providers expect an increase in turnover in the fourth quarter of 2018. In contrast, most media service providers once again gave a pessimistic assessment of their current business situation. The sub-indicator for the business situation has increased by 2.7 points compared to the previous quarter. With a current reading of 46.6 points, the indicator remains, however, below the critical 50-point mark for the third time in a row.

The economic mood among knowledge-intensive service providers improved slightly in the third quarter of 2018. Compared to the previous quarter, the sentiment indicator has increased by 3.1 points, thereby reaching a total of 68.1 points. Both the business situation and the business expectations were assessed more favourably than in the previous quarter. With an increase of 1.7 points to a level of 67.0 points, the sub-indicator for the business situation did not develop quite as well as the sub-indicator for business expectations, which jumped 4.4 points to a reading of 69.3 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 turnover situation, demand situation, turnover 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.