Service Sector: Optimism Grows

In the service sector optimism about developments over the next six months grew. Although fewer service providers than last year reported a positive outlook, the corresponding balance remains above its long-term average. Against a background of a very favourable business situation, expectations turned more positive once again. The balance figure for the current business situation was significantly higher than its historical average in June, despite declining for the third month in succession. The business climate in the service sector is also very favourable, but the steady deterioration in the climate that began last December and was briefly interrupted in May continued in June. According to the German Federal Statistics Office, business service providers increased their revenues considerably compared to the first quarter of last year. The 6.3% increase in revenues was even higher than the positive result for the last quarter of 2016 (+3.4%). Assessments of turnover in the first quarter of 2017 were also very favourable. In the second quarter a slightly smaller percentage of firms reported a higher turnover than during the same period the year previously. Moreover, a slightly larger share of service providers expected an upswing in demand in June, suggesting that turnover may increase markedly in the third quarter of 2017. According to the German Federal Statistics Office, the number of employed persons rose by 3.1% in the first quarter of 2017, just as it did in the fourth quarter of 2016. In the second quarter of 2017 survey participants reported exactly the same workforce growth rates. Service providers' recruitment plans also point to steady workforce growth beyond the second quarter.