Service Sector: Business Outlook Improves

The climate in the service sector brightened for the third month in succession, with the business climate indicator reaching its highest level to date this year. Service providers assessed their current business situation as very good. Although they were no longer as satisfied with their situation as in the last two months, their current business situation nevertheless remains far better than the long-term average. Assessments of the order backlog were also overwhelmingly positive, with the balance exceeding the long-term average by 13.5 points. Service providers reported recruiting more additional staff and plan to continue to hire in the months ahead. This suggests that the increase in employment (+3.1% versus last year) forecast by the German Federal Statistics Office for the first six months of 2017 looks set to continue. Developments in corporate service providers' turnover in the first half of 2017 were also positive (+5.6% versus the previous year). Reports by the service providers surveyed suggest that developments in turnover will be equally good in the months that follow. At the same time, most service providers expressed confidence about demand in the months to follow. Survey participants assessed their general business outlook, which improved for the fifth month in succession, positively. Widespread price increases can be expected in the short term.