New lending in Germany continues to decline

• Economic activity and investment still weak
• Lending down 3.5% in second quarter
• Recovery not until autumn

The economic slowdown and weakness in business investment continue to leave their imprint on the german credit market. KfW expects new lending to enterprises and self-employed professionals to drop by a further 3.5% in the second quarter of 2013 (against the previous year). That is the third successive contraction. Business financing requirements will not increase again until investment picks up in autumn, leading to growth in new lending business.

The current KfW Credit Market Outlook again identifies the decline in new lending as primarily demand-driven. Restrictions on the supply side are not observable, so access to credit continues to be excellent for enterprises seeking finance. This is also corroborated by KfW's current 2013 Business Survey and by the ifo credit hurdle, which is near its historic low. In addition, according to the Bank Lending Survey of the Deutsche Bundesbank, in the last three months banks have relaxed their lending criteria for the first time in two years and are not planning to tighten them again for the next three months.

"The economic slowdown and weak investment activity of the last 12 months has increasingly affected lending growth since the start of the year 2013. But I expect this to change in autumn. Then hopefully investment will resume", said Dr Jörg Zeuner, Chief Economist of the KfW Group. However, he does not expect this to fully filter through to the lending market until later in the year.

KfW calculates the KfW Credit Market Outlook exclusively for the German business newspaper Handelsblatt. The current edition of the indicator is available in the Internet at www.kfw.de/kreditmarktausblick (only in german language).