Press Release from 2021-04-06 / Group
KfW-ifo SME Barometer: SME business sentiment rises strongly with the arrival of spring
- Situation assessments much better, expectations slightly positive for first time since outbreak of pandemic
- Confidence has risen even more strongly among large enterprises
- Amid third coronavirus wave, sharp improvement in sentiment is only a snapshot
According to KfW Research, the new KfW-ifo SME Barometer shows that sentiment among small and medium-sized enterprises brightened for the second consecutive month in March – and this time very strongly. With the arrival of spring, SME business confidence rose by 8.1 points to -1.6 balance points. Despite the ongoing coronavirus crisis, assessments of the current business situation rose by a strong 6.0 points. At now -5.5 balance points, however, they are still clearly below the zero line, which represents the long-term average. SMEs’ business expectations, in turn, surged by 10.1 points and, at 2.0 balance points, were just barely positive again for the first time since the outbreak of the pandemic.
Large enterprises were even significantly more upbeat than SMEs in March. Their business sentiment soared by a record-breaking 10.6 points – nearly four times the typical monthly variation – to 9.3 balance points, lifting the indicator to a clearly above-average level in one fell swoop. Business situation assessments climbed 7.2 points to -2.2 balance points. As was the case for SMEs, business expectations of large enterprises picked up even more strongly (+14.1 points to 20.2 balance points).
Economic sentiment improved noticeably across all sectors and enterprise size classes in March, although without fundamentally altering the sometimes significant differences in the levels of business confidence of individual segments. By far the most significant improvements in business sentiment were recorded by retailers of both size classes (SMEs: +15.8 points to -8.3 balance points; large enterprises: +17.6 points to -9.6 balance points). Thus, they narrowly ceded last place on the sentiment leaderboard to small and medium-sized service businesses (+8.0 points to -11.7 balance points). This segment combines the bulk of contact-intensive service businesses in the arts and culture, entertainment, hospitality and personal services. By contrast, business sentiment in manufacturing is above average, especially among large industrial firms, where it improved yet again on a high level in March (+8.0 points to 19.6 balance points).
“The March findings of the KfW-ifo SME Barometer show a very encouraging improvement in sentiment on all fronts, but they are merely a snapshot”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW. “The loosening of restrictions announced for retailers and hospitality operators in early March – subject to falling case numbers – and the positive outlook for the global economy was probably the main driver behind the marked improvement in sentiment. But given the surging new wave of infections and the more contagious UK virus mutation, renewed restrictions and extended containment measures are now necessary. That will push back the economic recovery. But the strong improvements in sentiment across the economy as a whole in March illustrate the great potential for a rebound once the pandemic has been successfully suppressed. They are a vote of confidence in the coming economic rebound”, added Köhler-Geib. “By September, the six-month horizon for which business expectations were surveyed, a comprehensive recovery is definitely plausible. But this will be contingent on a systematic acceleration of the vaccination rollout combined with a convincing testing strategy.”