KfW Research: SME business sentiment continues to improve

• KfW ifo Business Climate Index rises for the fifth consecutive month
• Manufacturers in particular are more optimistic
• Economic recovery appears to be within reach

Germany’s SMEs are increasingly optimistic about the months ahead. As a result, the business climate improved for the fifth consecutive month in July, this time by 1.6 points to -14.2 balance points. Although it still remains below the long-term average represented by the zero line, the economic recovery appears to be within reach.

SMEs were only marginally more positive about their current business situation than in the previous month. But their expectations for the next six months improved sharply, further lifting the index out of the doldrums. 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.

“Much indicates that the sentiment upswing in the German economy is more than just a flash in the pan”,

said Dr Dirk Schumacher, Chief Economist of KfW.

“The new Federal Government has the funds for a massive fiscal stimulus. For example, the newly created diminishing balance method of depreciation could provide a boost to business investment in plant and equipment already in the second half of the year. The increase in public-sector infrastructure investment and defence spending should then have a positive effect on the German economy by 2026 at the latest.”

SMEs’ business expectations improved in all main economic sectors in July, but most of all in manufacturing, followed by wholesale enterprises, which are closely linked to industrial activity.

The mood also improved among large enterprises. After a plus of 1.3 points in July, however, the business climate index of large enterprises remains significantly worse than among SMEs, at -19.6 balance points. Situation assessments of large enterprises, in particular, remain very poor. This is probably due to the fact that large enterprises are typically influenced more strongly by geopolitical developments than SMEs.

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 (German page).