Service Sector: Optimism Wanes

In the service sector the number of survey participants who are satisfied with their business situation on balance fell for the third month in succession, although the figure still remained very clearly positive. Far fewer service providers expressed optimism about their six-month business outlook than last month. As a result, the business climate indicator declined for the fourth consecutive month. Assessments of developments in revenues remained positive, but figures were less favourable than at the beginning of the year. Accordingly annual growth rates in turnover will be smaller in the first quarter of 2018 than the figures published by the German Federal Statistics Office for the fourth quarter of 2017 (nominally +5% compared to last year). Service providers also scaled back their positive demand expectations slightly. According to reports by survey participants, they nevertheless recruited more staff. Since back in 2014 the German Federal Statistics Office has registered employment growth of between 2.6% and 3.6% compared to the previous year. Since service providers plan to recruit more staff over the months ahead, this growth looks as if it will continue this year. Service providers also remained satisfied with their current order situation and many saw opportunities to increase their prices. In March 2018 the prices for services in the consumer price index were 1.8% higher than for the same month last year.