KfW Research: KfW-ifo SME Barometer: SME business sentiment improved for second straight month

• Business expectations picked up in November, but situation assessments were slightly lower
• Large enterprises were also more upbeat
• Economic turnaround likely next year on the back of increased consumer spending

SME business sentiment in Germany rose for the second straight month in November – by exactly one point to -15.9 balance points. The upturn in sentiment was still driven by the less pessimistic business expectations, which rose quite noticeably by 3.0 points to now -19.0 balance points in November. They are still well below the zero line, which represents the long-term average, but they have pointed in the right direction since September. Assessments of the current business situation, however, fell by 1.4 points to now -13.0 balance points, after rising in the previous month.

The downturn in situation assessments was caused exclusively by the important services segment, however, where business sentiment dropped by 1.4 points overall. But in all other main economic sectors SMEs reported at least a slightly improved business situation and rising business expectations, so that business sentiment picked up there. The increase was most noticeable in wholesale, which recorded a rise of 4.7 points. In manufacturing, the main construction industry and retail, business sentiment rose by around 2.5 points each.

Business sentiment among large enterprises improved by 2.0 points from an even lower level to -24.7 balance points, remaining well below that of SMEs. Business expectations and situation assessments both improved among large enterprises in November.

“Business sentiment obviously bottomed out in the autumn. A glimmer of hope for the year ahead is also gradually emerging among businesses”,

said Dr Fritzi Köhler-Geib, Chief Economist of KfW.

“I expect a moderate economic recovery for 2024 that will be driven primarily by consumer spending. Wage growth will presumably be well above the inflation rate, while employment is set to remain steady.”

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