IT-Related Service Providers - Firms' Assessment of the Business Situation Remains Positive - Optimistic Expectations for Spring

The ZEW-IDI, sentiment indicator for the economic sector IT-related service providers, has slightly decreased by 0.5 points in the first quarter 2007 and now reaches a value of 63.8 points. The business situation in the first quarter 2007 is being assessed worse by the firms in the economic sector than in the fourth quarter 2006. The partial indicator which reflects the assessment of the current business situation has decreased in the first quarter 2007 by 6.6 points down to a value of 59.4 points. However, the expectations for the following quarter are considerably better. That is, the partial indicator which reflects the estimation of the future business situation has increased in the first quarter 2007 by 5.9 points to a value of 68.5 points. This is the result of a business survey among German IT-related service providers conducted by the Centre for European Economic Research (ZEW), Mannheim, in cooperation with the credit reference agency Creditreform, Neuss, in March 2007.

Nearly one tenth of the firms of the economic sector IT-related service providers report diminished returns in the first quarter 2007, however, approximately one fifth of the firms reports increased returns and a better demand situation than in the previous quarter. This positive assessment is especially prevalent among tax consultants and accountants whose turnover situation has improved in the first quarter 2007 in comparison to the fourth quarter 2006. The positive assessment of the demand situation is due to the technical consultants and the planners as well as the architects. More than half of the firms in the technical consulting and planning industry and approximately one fifth of the architects positively assess the trend of demand in the first quarter 2007. Next to the demand situation, firms in the advertising industry also assess the turnover and return situation better in the first quarter 2007 than in the fourth quarter 2006.

In comparison to the fourth quarter 2006, the employment situation in the first quarter 2007 has changed for the worse. In the first quarter 2007 only about one tenth of the firms of the economic sector IT-related service providers assessed their employment situation positively. However, the employment situation for the East German IT-related service providers has improved. In comparison to the fourth quarter 2006, in the first quarter 2007 the percentage of firms which hired new staff outweighs the percentage of firms which released staff. The accounting balance is at 0.9 points. The employment situation in the first quarter 2007 has improved for tax consultants and accountants as well as for architects. However, in the telecommunications services industry, two-thirds of the firms report a decline in workforce in the first quarter 2007.

The partial indicator which reflects the assessment of the future business situation has increased in the first quarter 2007 by 5.9 points to a value of 68.5 points. Both the turnover and the demand expectations of the IT-related service providers have improved in the first quarter 2007 in comparison to the previous quarter. That is, more than one third of the firms expect an improvement in turnover and demand for the second quarter 2007. Approximately one quarter of the firms of the economic sector IT-related service providers anticipates increasing returns for the following quarter. About two-thirds of the tax consultants and accountants expect an increasing demand in the second quarter 2007. Firms in the branch research and development are also optimistic about the second quarter 2007. More than half of these firms anticipate increasing returns. In the first quarter 2007, more than half of the business consultants expect increasing turnovers and returns for the following quarter. Firms in the ICT-trade have pessimistic expectations towards the second quarter 2007. Firms in these branches mainly expect decreasing turnovers, nearly one tenth expect decreasing returns.

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.

The business survey by ZEW/Creditreform

About 800 firms participate in this quarterly survey. The economic sector IT-related service providers comprises the Information and Communication Technology (ICT) service providers (firms in the branches of computer service and leasing, 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).

Overview of the ZEW/Creditreform business survey

Further information in german language

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 IT related service providers.

Contact

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