Falls in Morale Amongst Business-related Service Providers expected at the end of the year

In the fourth and final quarter of 2000, the morale amongst business-related service providers has worsened slightly. The seasonally-adjusted rate of growth in turnover has fallen from 4.4 per cent in the previous quarter to 4.3 per cent. When it comes to development of returns, the businesses in this sector have a more positive outlook than they did in the third quarter of 2000.

These are the findings of an economic survey carried out amongst business-related service providers by the Centre for European Economic Research (ZEW), Mannheim, in collaboration with the “Verband der Vereine Creditreform”, Neuss, in November and December 2000. This survey is undertaken on a quarterly basis and concerns approximately 1,100 businesses in the following sectors: tax advisors and certified accountants, business consultants, architects, technical planners, vehicle rental companies, machine rental companies, cargo handling and logistic firms, software providers, advertising agencies and waste disposal firms.

The latest business survey shows that at the end of 2000, the seasonally-adjusted growth in turnover amongst these firms has fallen significantly, from its highest annual level, 5.4 per cent in the second quarter of 2000, to 4.3 per cent. The growth in turnover had already slowed in the third quarter of 2000, when the growth in returns had also decreased by one percentage point in comparison to the second quarter of 2000. Looking at the returns in the fourth quarter of 2000, the picture is somewhat more positive: significantly more firms have reported rises, rather than falls, in returns. In addition, more firms have employed new staff than have let existing staff go.

The development amongst business-related service providers reflects the development of the total German economy. Although the economy as a whole continues to grow, domestic demand has increased to a lesser extent than predicted at the beginning of the year. Above all, it is the sharp increase in oil price that had a stifling effect on domestic demand. Foreign demand thus played a significant role in the business cycle of the fourth quarter of 2000. Business-related service providers do not expect to see any significant changes to their economic situation in the near future. They assume that the rate of growth of turnover will remain constant. According to the estimations of these businesses, returns will continue to increase. However, these businesses do have a more pessimistic outlook when it comes to staffing.

The ZEW/Creditreform economic survey also shows that business-related service providers in West and East Germany assess their economic situations somewhat differently. This was already the case in the previous quarter. The rate of growth of turnover amongst business-related service providers in West Germany is still significantly higher than it is for businesses in East Germany. Although West German businesses have seen falls in the rate of growth of turnover in the fourth quarter of 2000, their competitors in East Germany have reported increases since the previous quarter. East German businesses also report increases in demand. Even if more firms report falling, rather than rising returns, East German companies make a more positive judgement of the profit situation in comparison to the previous quarter. Staffing issues have eased for East German business-related service providers in comparison to the previous quarter. These service providers also expect to see further increases in turnover, demand and returns in the first quarter of 2001. They also have a positive outlook when it comes to developments in staffing.

In certain branches, business-related service providers are largely optimistic. In the branches with the highest turnovers; software providers, business consultants, as well as logistic and storage services, the proportion of businesses with increased turnovers has grown. In the case of software providers and business consultants, such growth can also be identified in relation to turnover. In addition, the proportion of businesses which have employed new staff in these two branches has also increased. As was the case in the previous quarter, the positive development in turnover of shipping and storage sectors is also now reflected by a mirrored development in returns. On balance, a greater proportion of businesses in this sector have employed new staff.

Tax consultants and chartered accountants report slight falls in the growth of returns. But still, the majority of businesses in this branch also report increased turnovers. In comparison to the previous quarter, however, the proportion of businesses reporting such positive developments has fallen. The turnover of technical consultants and planners has shown positive development. Significantly more businesses report increased, rather than decreased, turnovers. This positive development is also reflected in the profit situation. The proportion of businesses with increased returns is larger than the proportion of firms with decreased returns.

The developments for vehicle and machine rental services in the last quarter of 2000 were somewhat less positive. For the first time, the number of vehicle rental businesses reporting falls in turnover, was greater than the number of firms reporting increases. The development in returns has also levelled off. However, the proportion of businesses reporting increases in returns still remains greater than the proportion of firms reporting falls in returns. In these branches as well, considerably more businesses have employed new staff, than have let existing staff go.

The development in turnover and returns amongst machine rental businesses was somewhat constricted at the end of the year. The proportion of businesses reporting increased turnover and returns remained slightly greater than the number of businesses reporting decreases. In contrast, the proportion of businesses who reported having imposed staff redundancies was greater than the number of firms who reported having employed new staff. The economic situation of advertising agencies has improved. In comparison to the previous quarter, turnover as well as the returns reported by these businesses significantly increased in the fourth quarter of 2000. Architecture firms remain in last place in this context. In this branch, more businesses reported decreased, rather than increased, turnovers. The profit situation also remains restricted at the end of 2000.

Contact

Professor Dr Alexandra Spitz-Oener, Phone: +49(0)621/1235-293, E-mail: spitz@zew.de