KfW Research: SME sentiment continues to improve

• KfW ifo Business Climate Index rises for the fourth consecutive month
• SMEs and large enterprises both expect business to improve going forward
• Hopes for an economic turnaround are rising

Confidence among German SMEs continued to improve in June. The business climate, the key index of the KfW-ifo SME Barometer, improved for the fourth consecutive month – this time by 0.5 points to -14.2 balance points. Although it still remains below the long-term average represented by the zero line, the trend is pointing upward.

KfW evaluates the findings of the ifo Institute’s economic surveys for the KfW-ifo SME Barometer, broken down by company size classes and main economic sectors. Within the index, SMEs’ assessments of their current business situation stagnated at -16.6 balance points. However, their six-month outlook was again more positive than in the previous month, with the business expectations indicator improving by 1.0 points to now -12.2 balance points.

Large enterprises’ expectations also rose, improving by a significant 4.4 points to now - 9.3 balance points. Their current business situation assessments, however, clearly deteriorated.

The fact that expectations are now better than situation assessments, which is the case among both SMEs and large enterprises, is a typical sign of a beginning recovery.

“The trend indicates that things are about to improve for the German economy after what has been a rather weak summer”,

said Dr Dirk Schumacher, Chief Economist of KfW.

“German businesses appear to be anticipating a growing willingness on the part of the US to compromise on trade issues. But the ongoing improvement in expectations is surely attributable much more to increased confidence of businesses in the domestic economy.”

What stood out positively in June – as it did in the previous month – was sentiment among large construction firms. In May 2025, this segment of the economy was the first and, so far, the only one since Russia’s invasion of Ukraine in which business confidence was now somewhat higher than the historic average. Sentiment continued to improve here in June, rising by 2.5 points to +4.2 balance points.

“With their focus on public-sector and below-ground construction, large construction firms have a particularly promising outlook thanks to the Federal Government’s new fiscal package”,

said Dr Dirk Schumacher.

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

KfW supports SMEs with a number of promotional programmes on behalf of the Federal Government. More information is available at We are strengthening the SME sector (in German).