Service Providers of the Information Society - Economic Crisis Hits ICT and Knowledge-Intensive Service Providers

The ZEW-IDI, a sentiment indicator for the whole sector service providers of the information society, falls by 14.2 points to 39.9 points in the first quarter 2009. Therefore the indicator lies below the critical value of 50 points for the first time since it was established. A value of the ZEW-IDI above this mark signalises an improvement of the economic sentiment compared to the previous quarter, while any value below this mark stands for a deteriorating sentiment.

Thus, the current value of the ZEW-IDI shows that the service providers of the information society now assess their economic situation as clearly more negative compared to the fourth quarter 2008. "The economic crisis has now also reached the ICT- and knowledge intensive service providers," says Jenny Meyer, researcher at the Centre for European Economic Research (ZEW) in Mannheim. The assessments regarding the economic development in the second quarter 2009 is also affected by a higher degree of pessimism. However, the slump in sentiment was not as marked as the current assessment. The ZEW-IDI is based on a business survey among ICT service providers, conducted by the ZEW in co-operation with the credit reference agency Creditreform, Neuss in March 2009 (details regarding the survey are provided below).

In the first quarter 2009, the partial indicator reflecting the assessment of the current business situation fell by 21.5 points for the whole sector service providers of the information society compared to the fourth quarter 2008. The value therefore settles at 34.8 points in the first quarter 2009. The partial indicator reflecting the business expectations for the second quarter 2009 fell by 6.4 points to 45.7 points for the whole sector service providers of the information society in the first quarter 2009. This index value below the 50-points-limit shows that the companies within this sector expect their economic situation to deteriorate in the second quarter 2009. The economic sentiment among ICT service providers, comprising software companies, IT services, the ICT trade and telecommunication services, is more negative than that among knowledge-intensive service providers. Knowledge-intensive service providers include companies of the branches tax consultancy and accounting, management consultancy, architecture, technical consultancy and planning, research and development as well as advertising.

In the first quarter 2009 the branches software and IT services report a deteriorating situation regarding turnover, revenue and demand compared to the previous quarter. More than half of the companies see a decline in those factors. The expectations regarding demand were also cut back. In the first quarter 2009 the number of companies expecting demand to decrease in the second quarter 2009 outweigh those who expect demand to increase by 15.5 points. The situation regarding turnover, revenue and demand has also deteriorated for ICT traders in the first quarter 2009. The majority of ICT traders are hit by shrinking turnover and revenue as well as by declining demand. More than half of the companies also expect a diminishing revenue and a declining demand for the second quarter 2009.

The economic situation remains stable for tax consultancies and accountants in the first quarter 2009. Although the number of companies reporting rising values of turnover, revenue and demand slightly lost compared to the fourth quarter 2008, the majority of companies states a stable development of those factors. Management consultancies still seem to profit from the crisis. The number of companies reporting a positive development of turnover and revenue slightly increased in the first quarter of 2009 compared to the fourth quarter 2008. However, companies in the sectors technical consultancy and planning, research and development as well as advertising clearly suffer from the negative economic situation. The majority of companies within these three branches report declining values in turnover, revenue and demand.

Information on the ZEW Indicator of service providers of the information society (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 1000 firms participate in this quarterly survey. The economic sector service providers of the information society 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 service providers of the information society.

Contact

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