Subdued Economic Outlook
Information EconomyAfter having already made a rather cautious start to 2019, companies in the German information economy have found that the economic situation has since cooled further in the first quarter of the year. This assessment is based on the latest reading of the ZEW Economic Sentiment Indicator for the Information Economy, which saw a decline from 66.4 points in the last quarter of 2018 to a reading of 64.0 points in the first quarter of 2019. The ZEW Economic Sentiment Indicator is the result of a survey among companies in the German information economy, conducted by ZEW – Leibniz Centre for European Economic Research in March 2019.
This drop in the sentiment indicator can largely be attributed to negative development in the business situation. Compared to the previous quarter, the corresponding sub-indicator fell by 8.1 points in the first quarter of 2019 and now stands at 60.1 points.
Unlike the business situation, expectations regarding economic development improved slightly in the second quarter of 2019, with the corresponding sub-indicator currently standing at 68.1 points. On balance, around 41 per cent of the surveyed firms anticipate rising revenues, while 32 per cent expect demand for their products and services to go up.
The information economy consists of the sub-sectors information and communication technologies (ICT), media service providers and knowledge-intensive service providers.
For the second time in a row, the economic climate has cooled somewhat for companies in the ICT sector. The sentiment indicator for this sub-sector dropped two points compared to the previous quarter, but still remains at a relatively high level, at 70.9 points. In contrast to the previous quarter, the business expectations in the ICT sector have improved considerably. Following a high reading in the previous quarter, the corresponding sub-indicator continued its growth by climbing an extra 7.1 points, reaching a total of 77.7 points.
Economic mood deteriorates among media service providers
Business expectations in the ICT sector, by contrast, have considerably deteriorated compared to the previous quarter.
The economic mood among media service providers has deteriorated since the previous quarter. Following a decline of 2.9 points, the sentiment indicator fell below the critical 50-point mark for the first time in more than two years. This indicates that a small majority of media service providers gave a negative assessment of the economic mood. This can be attributed to the pessimistic business expectations. The corresponding sub-indicator has dropped 11.7 points, falling to as low as 46.6 points. With a level of 48.5 points, the sub-indicator for the business situation also remains below the 50-point mark.
Once again, the economic mood among knowledge-intensive service providers dampened somewhat in the first quarter of 2019. The sentiment indicator fell from 64.2 points in the previous quarter to a current reading of 62.3 points. This decline results from a negative development of the sub-indicator for the business situation, which dropped by 7.8 points to 59.2 points, and could not be offset by the improved assessment of the business expectations.
The Economic Sentiment Indicator for 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. Sub-sectors 4 to 9 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 sector of the information economy. The phrasing “share of the businesses” thus reflects the share of sales of the businesses.
