• Sentiment among SMEs improved in July, driven by significantly improved expectations
• SME confidence brightened in all sectors, with sharpest surge in manufacturing
• Business sentiment among large enterprises almost unchanged after rising in June
• Sales price expectations dropped again

Sentiment among Germany’s small and medium-sized enterprises (SMEs) improved significantly in July. The business sentiment indicator rose by 4 points to -17.3 balance points. The main drivers were improved business expectations and the positive development of situation assessments. However, current business sentiment remains well below the long-term average level.

These are some of the findings of the KfW-ifo SME Barometer. In it, KfW evaluates the findings of the ifo Institute’s economic surveys monthly, broken down by company size classes and main economic sectors. It surveys some 9,500 enterprises, including around 8,000 SMEs.

The improvement in SME sentiment in July extended across all economic sectors. Manufacturers experienced the strongest improvement. Their business sentiment rose by 9.7 points. Retailers and wholesalers also reported significant improvements. The rise was more moderate in the main construction industry and the services segment. Buoyed by the brighter outlook, SMEs’ employment expectations rose by 4.1 points to -7.4 points.

Large enterprises, however, showed only a minimal variation in business sentiment, which fell by 0.1 points. While expectations improved, situation assessments moved in the opposite direction. Overall, the gap to SMEs remains minor.

The July results are likely driven mainly by the reform programme of the governing coalition, with bureaucratic burdens easing and the intermittent de-escalation of the Iran war.

Sales price expectations fell again in July, dropping by 1.8 points among SMEs and 6.6 points in large enterprises. Having decreased for the third straight month, price expectations are thus no longer significantly above the level prior to the Iran war.

“SMEs are looking ahead again. Sentiment probably improved partly as a result of the reform programme that was adopted before the summer recess and in which the governing coalition demonstrated its ability to compromise, promising significant relief particularly with respect to bureaucracy,”

said Philipp Scheuermeyer, economist at KfW Research.

“Overall, however, the environment remains fragile. As exports from the Gulf region remain disrupted, the risk of setbacks continues to be high, even if the economic data is steady so far.”

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 strenghtening the SME sector (German page).