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Press Release from 2018-11-08 / Group, KfW Research

KfW-ifo SME Barometer: SMEs are the anchor of stability in corporate sentiment

  • Business climate in the SME sector stable at a high level
  • Major slump in sentiment among large companies
  • Concern about global economic risks lowers export expectations

The current KfW-ifo SME Barometer shows that SMEs are the anchor of stability for corporate sentiment in October. While the business climate of large companies is rapidly deteriorating, the sentiment among small and medium-sized enterprises is virtually stable (-0.1 points) at a high level of 18.0 balance points. Global economic risks, which became more pronounced again in autumn, seem to be less of a source of uncertainty for small and medium-sized enterprises than for large companies. The already excellent business situation of SMEs in particular improved by 0.9 points to 28.8 balance points. Though with regard to business expectations, the SME sector is now somewhat more pessimistic (- 1.0 points), the balance of 7.7 points continues to indicate above-average positive assessments of the future.

The business climate for large companies was significantly worse than for SMEs in October. Particularly striking is the drop in business expectations, which at -7.4 points, is 2.7 times the usual monthly change. The situation assessments are also clearly down (-4.9 to 16.4 balance points) after having drifted ever further away over the course of the year from the peak reached in January. The deterioration in sentiment among large companies applies to virtually all industries. The only exception is the construction industry, which has set a new record.

A glance at the export expectations of the manufacturing sector shows that the main reason for the more pessimistic assessments of the companies is likely to be various global economic risks; a Brexit deal was also not reached with the UK in October. However, this would be the prerequisite for entering a transition phase, which is also important for the German economy. Since the battle lines in the trade war between the USA and China are increasingly hardening, some companies are also likely to fear an economic slowdown in China and thus weaker export demand. As a result, the economy's export expectations fell in October – and even though this was also the case for small and medium-sized enterprises, it was much more pronounced among large companies. Following a decline of -2.3 points, their export expectations have now even entered negative territory, with -0.8 balance points.

"The fourth quarter is getting off to a mediocre start for the German economy due to the rapidly declining sentiment among large companies - although it should not be forgotten that the level of sentiment in a long-term perspective still is persistently high," says Dr Jörg Zeuner, Chief Economist at KfW. "The results of the KfW-ifo SME Barometer also give rise to hopes that small and medium-sized enterprises will remain an economic stabiliser in times of considerable global uncertainties."

The current KfW-ifo SME Barometer can be accessed at: www.kfw.de/KfW-Group/Service/Download-Center/Research-(EN)/KfW-ifo-SME-Barometer-(EN).