The German Information Economy – in Good Shape with a Positive Outlook

Economic sentiment among companies in the German information economy sector has been largely positive in the second quarter of 2017. The ZEW sentiment indicator is currently at a high level of 67.7 points, signalling that the majority of companies have a positive view of the economic climate in this sector of the economy. This represents an increase of 0.9 points compared to the previous quarter. This is the finding of a survey conducted among firms in the German information economy by the Centre for European Economic Research (ZEW), Mannheim, in June 2017.

The increase in the sentiment indicator can be almost solely attributed to improved business expectations. In this quarter, the sub-indicator for business expectations rose by 2.8 points compared to the previous quarter and currently stands at 69.3 points. In surpassing the critical 50 point mark by a considerable margin, the indicator reflects that the majority of companies are anticipating higher demand for their products as well as an increase in turnover in the third quarter of 2017. The development of demand and turnover in the second quarter received a slightly less positive assessment from the surveyed companies, with the sub-indicator for the business situation falling by one point compared to the previous quarter. However, the sub-indicator still remains at a high level of 66.2 points.

The information economy is composed of information and communications technology (ICT) firms, media service providers and knowledge-intensive service providers. For companies in the ICT sector, the economic mood has remained positive and stable, with the sentiment indicator climbing 0.7 points to a current level of 72.2 points. This slight change in the sentiment indicator underlies a reverse trend in the sub-indicators. The sub-indicator for the business situation fell 6.9 points down to 70 points. This is, however, still a high reading, signalling a continued largely positive assessment of the business situation. ICT firms are also more optimistic about the future than they were in the previous quarter. While in the first quarter of 2017 on balance only 34.1 per cent of firms had expected an increase in turnover in the next quarter, in the second quarter this figure has risen to 55 per cent. 43.1 per cent of firms also expect demand for their products to increase. As a result, the corresponding sub-indicator has climbed to 74.5 points.

More optimistic mood among media and knowledge-intensive service providers

The economic mood among media service providers was also positive in the second quarter of 2017, with the sentiment indicator climbing 3.9 points to 58 points. The indicator has thus remained above the critical 50 point mark for more than a year now. The increase in the sentiment indicator among media service providers is largely due to the positive trend recorded in their business expectations. The sub-indicator for business expectations increased by 8.7 points to 64.5 points. In contrast, the assessment of the current business situation has altered only very slightly compared to the previous quarter, with the corresponding sub-indicator dropping by only 0.2 points to its current level of 52.2 points. This indicates that the number of companies with a positive assessment of the business situation only slightly outweighs the number of those with a more negative view.

After recording the most positive economic mood in years in the previous quarter, the sentiment indicator among knowledge-intensive service providers increased again slightly in the second quarter of 2017, climbing 0.5 points to 66.2 points. The sub-indicators for both the business situation and business expectations reached almost identical levels, with the former reaching 66.1 points and the latter 66.2 points. Positive readings for the individual branches of the knowledge-intensive service sector confirm that, even within the individual sub-sectors, the majority of companies gave a positive assessment of the economic mood.

For further information please contact:

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

The Economic Sentiment Indicator in 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 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 ZEW Business Survey in the Information Economy

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.