Business Activity Picks up in German IT-Related Services Sector

The value of the ZEW-IDI, sentiment indicator for the German IT-related service providers, is 62.6 points in the second quarter of 2004. This value clearly exceeds the value of 55.4 points of the first quarter.

Both the firms' evaluation of the current business situation, as well as their business expectations for the third quarter of 2004 add to this noticeable increase in the indicator value. The partial indicator of the ZEW-IDI which reflects how the firms rate the current economic situation is 58.2 points in the second quarter of 2004 (previous quarter 51.8 points). The fact that this value clearly exceeds the 50 point mark indicates a measurable increase in business activity compared to the first quarter of 2004. The partial indicator that shows the economic expectations for the third quarter of 2004 is 67.3 points. The strong rise in this indicator value compared to the 59.1 points of the first quarter signals the confidence with which the German IT-related service providers look ahead to the second half of 2004.

This is the result of a business survey among German IT-related service providers that the Centre for European Economic Research (ZEW) and the credit reference agency Creditreform conducted in June and July 2004. About 1,100 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-specialised 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 planning, research and development as well as advertising).

In the second quarter of 2004 tax consultants and accountants again have the highest turnover share of firms reporting an increase in sales compared to the first quarter of 2004. Comparatively surprising is the high turnover share of firms reporting a sales increase in ICT-specialised trade and architecture. The turnover share of those enterprises which report a sales increase compared to first quarter sales is above 55 percent in these two branches. In the first quarter of 2004 these branches had experienced a below average sales development. Enterprises in computer servicing and -leasing as well as in telecommunications on average also report of significant sales improvement.

Despite the positive developments in demand and sales, the employment situation within the sector of IT-related service providers continues to worsen. The overall balance of positive and negative employment changes is negative again in the second quarter of 2004. However, the branches telecommunications, tax consultancy and accounting as well as ICT-specialized trade show first signs of improvement. The balance of positive and negative employment changes is positive in these branches of the services sector. Overall expectations for the employment situation in the sector in the third quarter of 2004 raise hopes that the negative employment trend can be reversed by the end of the year. On average, the enterprises which plan to increase their staff in the third quarter of 2004 have a higher turnover share than those enterprises which plan to reduce their staff at that time.

Additional 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.

Contact

Dr. Margit Vanberg, E-mail: vanberg@zew.de