KfW Research: Sentiment among German SMEs is edging up again

• Business climate index has risen slightly
• Main construction industry has seen the strongest rise in confidence – among both SMEs and large enterprises
• Outlook for employment has weakened, particularly among large enterprises

SME business confidence in Germany increased moderately in February. The index rose 0.8 points to now -14.1 points. That means sentiment is still below the zero line, which represents the long-term average. But the increase in the KfW-ifo SME Barometer is the latest in a whole series of positive sentiment and leading indicators from February.

The rise in confidence in the SME sector was mainly due to improved six-month business expectations. Situation assessments also improved slightly. The most notable rise in SME sentiment in February was in the main construction industry, where the recovery continued.

Business confidence rose even more strongly among large enterprises than among SMEs. It climbed 3.1 points to -16.2 points, with the positive impetus coming solely from assessments of the current business situation. As was the case in SMEs, the main construction industry saw the strongest improvement in sentiment.

The only downer in the generally improving situation were the employment expectations of large enterprises, which fell again and continued their steep downward trajectory. Companies appear to be expecting further job cuts. In SMEs, in turn, employment expectations appear to have stabilised on a low level.

“Businesses are now more optimistic about their future, and they also have a more positive view of their current situation. This raises hopes that the economy will perform well in 2026,”

said Dr Dirk Schumacher, Chief Economist of KfW.

“The Federal Government’s investment package reached parts of the industrial sector in the form of higher order intakes already in 2025 and will gradually filter through to the broader economy.”

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).}