Slight Setback of Business Situation Does not Unsettle the Overall Good Economic Sentiment

In the first quarter of 2016, the economic sentiment among companies in the information economy is positive, as shown by the ZEW Sentiment Indicator for Information Economy. Although slightly decreasing, its current level of 62.3 points is still a very positive value, far above the critical 50 per cent mark. The majority of companies still hold positive assessments of both their current business situation and the economic outlook for the second quarter of 2016. This is the result of a survey conducted by the Centre for European Economic Research (ZEW) in March 2016 within the information economy (further information regarding the Sentiment Indicator and the survey at the bottom of the press release).

Compared to the fourth quarter of 2015, the Sentiment Indicator decreased by 1.2 points in the first quarter of the current year. This decrease is caused by a minor slowdown of the current business situation. The corresponding sub-indicator has dropped by 6.7 points compared to the previous quarter, falling to a reading of 58.5 points. One of several potential reasons for a minor slowdown of the business situation is that the favourable business climate seen in the fourth quarter of 2015 does not fully continue into the first quarter of 2016. In contrast to the business situation, the sub-indicator of the business expectations for the second quarter of 2016 improves to a level of 66.3 points.

The information economy sector consists of the sub-sectors information and communication technologies (ICT), media service providers, and knowledge-intensive service providers. In the current survey, ICT sector companies assess the economic sentiment less positively than in the last quarter. The Sentiment Indicator has fallen by six points to 66.6 points. This decrease in sentiment is caused by the worsened assessment of the current business situation. The sub-indicator for the business situation accounts to 61.6 points in the first quarter of 2016 – 12.1 points less than in the previous quarter. However, the critical 50 per cent mark is still vastly exceeded, indicating a positive business situation for the majority of companies. Meanwhile, the economic expectations for the second quarter of 2016 have hardly changed compared to the previous quarter and remain on a high level of 72.1 points.

The economic sentiment in the media sector has further declined in the first quarter of 2016. After the Sentiment Indicator had already fallen just below the 50 per cent mark in the previous quarter, it has now dropped further by 4.7 points. Its current level of 44.7 points indicates that the majority of media service providers negatively assess the economic situation. The sub-indicator for the business situation has further dropped, falling to a reading of 45.7 points. The business expectations for the next quarter are also declining in the media sector.

Among the knowledge-intensive service providers, the economic situation remains positive. The sub-indicator for business expectations reaches a level of 66.3 points, which equals an improvement by 9.1 points compared to the previous quarter. By contrast, the sub-indicator for business situation has slightly decreased. Its current reading of 58.6 points still indicates an overall positive economic development in comparison to the previous quarter.

For more information please contact

Daniel Erdsiek, Phone +49(0)621-1235-356, E-mail erdsiek@zew.de

The Economic Sentiment Indicator for the Information Economy

The Economic Sentiment Indicator for the Information Economy is composed of the four components sales situation, demand situation, sales expectations and demand expectations (each in comparison with the previous and following quarter). They are equally taken into account for the calculations. The sales situation and the demand situation form a sub-indicator reflecting the business situation. Sales expectations and demand expectations form a sub-indicator reflecting the business expectations. The geometrical mean of the business situation and the business expectations is the value of the Economic Sentiment Indicator in the Information Economy. The sentiment indicator can take on values from 0 to 100. Values above 50 indicate an improved economic sentiment compared to the previous quarter, values smaller than 50 indicate deterioration compared to the previous quarter.

The economic survey conducted by ZEW

About 5,000 businesses with a minimum of five employees participate in the quarterly survey conducted by ZEW. The companies surveyed belong to the following business sectors: (1) ICT hardware, (2) ICT service providers, (3) media, (4) law and tax consultancy, accounting, (5) public relations and business consultancy, (6) architectural and engineering offices, technical, physical and chemical analysis, (7) research and development, (8) advertising industry and market research, (9) other freelance, academic and technical activities. Combined, all nine sectors make up the economic sector of the information economy. The ICT sector consists of ICT hardware and ICT service providers. Sectors three to nine make up the knowledge-intensive service providers. Overview of the ZEW Business Survey in the Information Economy (in German) http://www.zew.de/konjunktur.

Remark on the projection

To ensure that the analyses are representative, ZEW projects the answers of the survey participants with the sales value of the businesses with regard to the entire information economy sector. The phrasing "share of the businesses" thus reflects the sales share of the respective businesses.