KfW Research: Sentiment among German SMEs remains muted

• Moderate uptick from January evaporated in February
• SME business climate index is falling again
• Large enterprises, however, are somewhat more optimistic

The mood among Germany’s SMEs was still on the rise at the start of the year. But by February, it was all over. Their business climate index fell by 0.6 points to -21.9 balance points, bringing it well below the long-term average represented by the zero line.

These are the findings of the KfW-ifo SME Barometer. KfW evaluates the results of the ifo economic surveys by company size classes and main economic sectors.

In February, SMEs were more negative about their current situation and held more negative six-month business expectations than in the previous month. Situation assessments dropped by 0.7 points on January to now -20.0 balance points. The minor upward trend from the start of the year has not continued. Business expectations declined by 0.4 points to -23.9 balance points.

“There appears to be a small glimmer of hope in the economic sectors that have been worst hit by the crisis. SME sentiment improved slightly in February in both manufacturing and the closely linked wholesale sector,”

commented Dr Philipp Scheuermeyer, economic expert at KfW Research.

This was mainly due to improved business expectations, and manufacturers’ export expectations are also picking up. “Apparently, the protectionist ideas of US President Trump have hardly had any negative impact on the expectations of businesses. For now, the threats of tariffs may even have had the positive effect that firms are pulling exports forward,”

said Dr Philipp Scheuermeyer.

Unlike SMEs, large enterprises reported an improvement in business sentiment in February. It climbed by 1.3 points to -26.4 balance points. Despite the minor improvement, however, sentiment among large enterprises continues to be worse than among SMEs.

The current KfW-ifo SME Barometer can be downloaded from: KfW-ifo SME Barometer | KfW

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