Knowledge-Intensive Service Providers and ICT Service Providers Cautiously Optimistic

In the second quarter 2009, cautious optimism has emerged regarding the business situation in the sector service providers of the information society, which includes both knowledge-intensive service providers and ICT service providers.

The ZEW-IDI, a sentiment indicator for the sector service providers of the information society in Germany, peaks at 49.1 points. This is slightly below the critical value of 50 points, which indicates a deteriorating business sentiment compared to the previous quarter. However, the partial indicator reflecting the expectations for the third quarter 2009 rose to 53.4 points in the second quarter 2009. "This value signals an improvement of the business expectations compared to the previous quarter. A cautious optimism seems to develop among firms that the economic situation may stabilise," says Jenny Meyer, researcher at the Centre for European Economic Research (ZEW) in Mannheim. The ZEW-IDI is based on a business survey among service providers of the information society, conducted by the ZEW in co-operation with the credit reference agency Creditreform, Neuss in June 2009 (details regarding the survey are provided below).

The situation of the whole sector is similar to that of the sub-sector ICT service providers which includes software businesses, IT services, ICT-specialised trade and telecommunication services. The sentiment indicator for this sub-sector rose in the second quarter 2009. The partial indicator reflecting the business expectations rose above the critical value of 50 points to 51.7 points. This indicates an improvement of the business sentiment among ICT service providers. However, the knowledge-intensive service providers, comprising businesses of the branches tax consultancy and accounting, management consultancy, architecture, technical consultancy and planning, research and development as well as advertising, are more sceptical regarding the business expectations for the third quarter 2009. The respective partial indicator rose to 48.2 points, still remaining below the critical value of 50 points. This indicates a deterioration compared to the previous quarter.

The business situation among software businesses and IT services was stable in the second quarter 2009. The majority of businesses reported unchanged turnover and revenue. Moreover, unchanged turnover and revenue as well as stable demand are expected for the third quarter 2009. The majority of businesses in tax consultancy and accounting also reported unchanged turnover and revenue in the second quarter 2009 as well as stable demand compared to the previous quarter. Architects are less pessimistic as well and assess their business situation as predominantly stable. The number of businesses reporting decreasing turnover, revenue and declining demand still outweighs the number of those reporting increasing values of those factors. However, the respective balances are now smaller.

The businesses in the branches technical consultancy and planning, ICT-specialised trade, advertising as well as research and development are still pessimistic about the current business situation. However, these branches also expect the situation to stabilise in the third quarter 2009. The majority of technical consultants and planners do not expect changes in turnover and demand in the third quarter 2009. The employment situation also turns out to be stable for this period. The majority of businesses in the branch research and development reported decreasing turnover and revenue. Demand, however, is described as stable. The majority of businesses in research and development expects demand to remain stable in the coming quarter. Most advertising companies stated a current decrease in turnover and revenue. Regarding the third quarter, advertising companies are rather sceptical and mostly expect turnover and revenue to decrease or to remain at the same level. The majority expects demand to remain stable.

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 900 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