German SMEs bank on steady economic upswing

• Renewed improvement in business climate for small and medium-sized enterprises in May
• Business assessments at annual high, expectations slightly better
• Large enterprises sceptical

German SMEs continue to be in buoyant mood as revealed by the latest KfW-ifo SME Barometer: business sentiment among small and medium-sized companies rose again in May following the powerful gain in the previous month. Rising 1.0 point to 15.9 balance points, the increase is less pronounced this time round but it is a surprisingly good result given the two railway strikes carried out in the survey period, which certainly put a damper on sentiment.

Both of the index components rose in May. Business situation assessments reached their highest level in almost a year, moving up 1.8 points to 24.5 balance points. SME owners are also somewhat more optimistic about future business than in April. However, the only moderate increase of 0.3 points to 7.1 balance points shows that the companies remain far from a state of economic euphoria and are realistic in their expectations.

"SMEs are banking on a steady economic upswing this year – and that's exactly what can be expected. For 2015 I anticipate economic growth of 1.5% in Germany, driven primarily by domestic demand and on the export side by a European economy that continues to consolidate", said Dr Jörg Zeuner, Chief Economist at KfW.

Sentiment among large enterprises in May shows that overall economic expectations in Germany are not limitless. They revised their business sentiment downward by 1.0 point to 13.6 balance points. Business assessments and expectations deteriorated to the same extent (-0.9 points to 24.1 balance points and -1.0 points to 3.2 balance points). The reason for the relative disenchantment of the large internationally operating enterprises is the sluggish global economy. "Manufacturing and wholesale in particular had expected the strong euro depreciation to provide a significant boost in demand from markets outside the monetary union. The impetus so far, however, has been minor because the structural slowdown of growth in emerging markets like China, Russia and Brazil is weakening the momentum of global trade as much as the recently disappointing US economy", explained Zeuner.

The current KfW-ifo SME Barometer is available under www.kfw.de/mittelstandsbarometer.