KfW Research: SME business sentiment deteriorated in August

• The KfW ifo Business Climate Index has dropped after rising for five months
• Tariff agreements are obviously a dampening factor as export expectations are falling
• Fiscal package could soon lift the mood

Confidence among German SMEs dropped again for the first time in August after rising for five consecutive months. The business climate index dipped slightly by 0.6 points to now -13.1 balance points, with the zero line representing the long-term average. The situation assessments and six-month expectations of small and medium-sized enterprises both fell moderately.

These are the findings of the KfW-ifo SME Barometer, in which KfW evaluates the findings of the ifo Institute’s economic surveys, broken down by company size classes and main economic sectors.

In August the sharpest drop in sentiment was recorded in the small and medium-sized services sector. Confidence decreased only moderately in retail and manufacturing, while the mood improved slightly in the main construction industry and wholesale sector. The trend in manufacturing, in particular, gives an idea of how companies perceived the tariff agreement that was reached with the US in the survey period. The minor setback in sentiment along with the recorded significant decline in SMEs’ export expectations could indicate that many enterprises had hoped for a better result. Export expectations dropped by 3.8 points to -13.8 balance points.

Unlike among SMEs, business sentiment among large enterprises improved by 1.5 points in August to now -18.1 balance points. While enterprises also held a slightly more negative view of their current situation, their business expectations rose sharply.

"The mood among German businesses is patchy. The US protectionism is putting obstacles in the way of export-oriented businesses, and the domestic economy, too, continues to falter,”

said Dr Dirk Schumacher, Chief Economist of KfW.

“Towards the end of the year, and particularly in 2026, the massive increases in government spending will likely drive growth in Germany and lift the mood among businesses.”

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).