KfW-ifo SME Barometer: Confidence slips over protectionism woes

• SME business sentiment drops for second consecutive month
• Expectations are down slightly again
• Despite decline, situation assessments remain very positive
• Large enterprises are clearly less confident than SMEs

According to the March edition of the KfW-ifo SME Barometer, business confidence among SMEs has dropped for the second consecutive month but remains on a high level. The business climate dropped to 26.9 balance points at the beginning of spring (down 2.0 points). The more muted sentiment is primarily due to the noticeable 3.2-point decline in situation assessments from the previous month’s all-time high. Nonetheless, at 42.8 balance points, businesses still rate their situation very positively. SMEs’ expectations continued going downward at a slightly slower pace (-1.0 points to 11.6 balance points).

Large enterprises also revised their assessments of the current business situation downward significantly to 40.1 balance points (-4.8 points). Their expectations also dropped once again to now 6.2 balance points (down 1.7 points). Business confidence among large enterprises thus fell to 22.7 points in March (down 3.1 points). The significantly lower confidence level is probably due primarily to the typically more pronounced international trade orientation of large enterprises compared with SMEs.

“The US president’s trade policy moves have created uncertainty”, said Dr Jörg Zeuner, Chief Economist of KfW Group. “Tariff impositions, however, will definitely not reduce the US current account deficit. For that to happen, the state, businesses and private households would have to live more within their means. Tariffs are not the way to achieve this. But swift European countermeasures would also be a mistake. Rather, all should stand up for fair trade, from the US to Europe to China.”

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