German IT-Related Service Providers Suffer from Economic Downturn

In the third quarter of 2002 the turnover growth in the sector of IT-related service providers has decelerated again. It is currently standing at a yearly rate of 1.4 percent.

The fact that in the third quarter of 2002 far more enterprises of this sector report a rising demand than in the first two quarters justifies hope that the economic downturn may be coming to an end.

This is the result of a business survey among IT-related service providers that the Centre for European Economic Research (ZEW) and the credit reference agency Creditreform conducted in September and October 2002. 1200 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-specialized 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 plan-ning, research and development as well as advertising).

The growth dynamics of the IT-related service providers in the third quarter of 2002 are hampered by the economic downturn in the entire German economy. Compared to the prior quarter the sector's yearly rate of growth in turnover has decreased by more than one per cent. Also, the trend of returns of the IT-related service providers has not yet stabilised in the third quarter. As in the two prior quarters more enterprises report decreasing rather than increasing returns. Compared to the first two quarters of the year the trend of demand, however, is favourable. This already reflects in the personnel development. While the turnover share of the enterprises which increased their workforce was below 20 per cent in the second quarter, it climbed to about 30 per cent in the third quarter.

Despite the continuing economic downturn the IT-related service providers are optimistic for the fourth quarter of 2002. Compared to the prior quarter, the turnover share of those enterprises which forecast an improvement for the fourth quarter in all cyclical indicators (turnover, returns, demand, personnel and prices) increased. The turnover share of those enterprises expecting their turnover to increase in the fourth quarter amounts to even more than 50 per cent.

Contact

Dr. Margit Vanberg, Email: vanberg@zew.de