KfW-ifo SME Barometer: SME business sentiment chasing records again

After taking a breather in the previous month, confidence reaches new all-time high in September

Situation assessments rose more sharply than expectations

Germany’s upswing remains robust

After taking a short breather in the previous month, SME business confidence is back to chasing records. In September the key indicator of the KfW-ifo SME Barometer reached a new all-time high of 30.7 balance points for the fourth time this year, gaining 2.4 points. Both components of the indicator improved, with German SMEs rating their business situation more positively than ever before since surveys were first conducted for unified Germany in 1991 (+3.8 points to 45.0 balance points). Business expectations climbed by 1.2 points to 16.8 balance points. The last time small and medium-sized enterprises were more upbeat was in early 2011.

Large enterprises are also entering autumn with more confidence. Their business climate improved by 1.3 points to now 26.5 balance points. This is backed by nearly equal improvements in situation assessments (+1.3 points to 39.9 balance points) and business expectations (+1.5 points to 13.6 balance points). Large enterprises are very confident but not quite as euphoric as SMEs, which may be explained by the uncertain foreign and trade policy direction of the USA, the continuing geopolitical tension in the North Korea conflict, and Brexit simmering in the background as significant imponderables. Along with the most recent appreciation of the euro, these uncertainties may pose risks for business operations of large, export-oriented firms in particular.

Irrespective of these risks, the European and global business cycle has picked up since spring and, together with reliably strong domestic demand in Germany, is allowing confidence to reach better than average to very high levels across all sectors. The construction industry defended its position as sentiment leader. The strongest sentiment improvement in September was reported by small and medium-sized wholesalers (+3.9 points to 32.2 balance points), followed by large retailers (+3.2 points to 6.3 balance points) and medium-sized manufacturers (+3.0 points to 30.3 balance points).

‘The new federal government will begin the new legislative period with a strong cyclical tailwind. That will make it easier to tackle the tasks ahead’, commented Dr Jörg Zeuner, Chief Economist of KfW Group. ‘Germany needs not just more investment in infrastructure and affordable housing but an education system that leaves no talent behind, as well as a start-up, innovation and digitalisation initiative. The window for strengthening the European Union together with France and the other partners is currently wide open. This opportunity should now be seized with determination.’

The current KfW-ifo SME Barometer can be downloaded from:
www.kfw.de/SME-Barometer