KfW Research: SMEs hope for better business

• KfW ifo business climate index recovers from September setback
• SMEs are more optimistic about the future, but situation assessments are still marked by scepticism

After experiencing a setback in September, sentiment among German SMEs has improved again. In October, the business climate index continued on the trajectory it has been following since the start of the year. It increased slightly by 1.3 points to its current level of -14.6 balance points, with the zero line marking the long-term average. In short, sentiment is improving, but the situation could still be much better.

Since the beginning of the year, the upward trend has been largely driven by increasing business expectations from SMEs. However, businesses have been evaluating their current economic situation quite negatively for several months now. These are the conclusions of the KfW ifo SME Barometer, in which KfW Research evaluates the findings of the ifo Institute's economic surveys, broken down by company size classes and main economic sectors.

“Businesses in Germany are hoping the economic conditions will improve soon”,

states Dr Dirk Schumacher, Chief Economist at KfW.

"There are high expectations that the German Federal Government will swiftly implement the announced fiscal package. Many businesses rate their current business situation as not good. There is therefore significant pressure to take action."

Among large businesses, the business climate also improved in October by 2.2 points to its current level of -16.3 balance points. This increase was solely driven by expectations; large businesses are evaluating their current situation more negatively than they did in the previous month. They are also very pessimistic about the job situation: many appear to be anticipating having to reduce their workforce. In contrast, employment expectations among SMEs improved slightly in October and are far less negative than among large businesses.

The latest KfW-ifo SME Barometer is available at: KfW-ifo SME Barometer | KfW

KfW supports SMEs with numerous promotional programmes on behalf of the German Federal Government. For more information, see We strengthen SMEs (in German).