KfW-ifo SME Barometer: Sentiment among both SMEs and large enterprises climbs to unprecedented levels

• SME business confidence rises to new record level only on the back of improved expectations
• Business climate among large enterprises now also on record high after major surge
• Germany’s upswing remains steady and vigorous

Germany’s economic engine is humming along and business confidence is breaking one record after another. While SMEs raised the bar for all-time high business confidence in October for the fifth time in a row this year to now 30.8 balance points (+0.2 points on the previous month), large enterprises exceeded the December 2010 high of 29.7 balance points for the first time in almost seven years (+3.0 points on the previous month). It is thus only the third time that confidence among SMEs and large enterprises climbed to a record high together. Not only does this underscore the momentum of the current upswing, it also confirms its very broad basis.

The improved sentiment among SMEs is exclusively due to the more optimistic outlook for the future. Business expectations for the next six months increased by 1.9 points to 18.7 balance points. Situation assessments, however, dropped by 1.7 points (to what remains an extremely high level of 43.0 balance points). Large enterprises’ situation assessments, however, improved tangibly (+3.4 points to 43.5 balance points). The steady rise in business expectations continued as well, a trend that has been observable since July (+2.5 points to 16.2 balance points).

The individual sectors broke several records again in October and also presented some otherwise impressive results. Business confidence among large manufacturers reached a new all-time high (+4.3 points to 32.7 balance points) and confidence among German manufacturing SMEs remained only marginally below its peak level of the previous month (-0.8 points to 29.3 balance points). At the same time, small and medium-sized construction firms continued chasing records at a fast pace (+3.8 points to 40.6 balance points) while large construction enterprises remained Germany’s most upbeat sector by far despite a slight drop (-1.1 points to 46.6 balance points). At the beginning of the winter half year, the retail sector reported strong confidence increases in both size classes (SMEs +3.0 points to 25.9 balance points, large enterprises even +8.2 points to 15.5 balance points). By contrast, wholesale trade is the only sector in which the business climate dropped noticeably in both segments in the reporting month (SMEs -3.2 points to 28.6 balance points, large enterprises -5.0 points to 27.0 balance points). Nevertheless, confidence in this sector remains on a historically very high level.

‘Tailwind from domestic and international demand combined with stable prices have boosted business confidence’, said Dr Jörg Zeuner, Chief Economist of KfW, commenting the latest results of the KfW-ifo SME Barometer. ‘The high expectations are justified. We owe our continuing upswing to the global recovery and growing exports as well as to the continuing growth of employment and wages, which is securing stable domestic momentum. But the success should not detract from our focus on strengthening the sources of tomorrow’s growth. These include education, digitalisation, innovation and equitable distribution of progress and growth, as well as a sustainable architecture for Europe’, said Zeuner.

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