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KfW-ifo SME Barometer: SME sentiment in Germany slightly more stable while confidence among large enterprises continues to drop

Press Release from 2019-10-02 / Group, KfW Research

  • Situation assessments have improved moderately but expectations remain virtually unchanged
  • Large enterprises’ confidence is still in freefall
  • For now, business sentiment remains split between SMEs and large enterprises

After deteriorating sharply in the previous month, business sentiment in the German SME sector recovered slightly in September and rose by 1.1 points to a level that is in line with the long-term average. The recovery is mostly due to improvements in SMEs’ assessments of their business situation, which rose by 2.0 points to 12.2 balance points. The pessimism that has grown in the SME sector since the end of 2018 about the coming six months continues. Business expectations did increase marginally by 0.4 points, but they remain at a very low -11.8 balance points.

At the same time, business sentiment among large enterprises knows just one direction, and that is down, falling by one point to -14.1 balance points in September. Situation assessments have dropped (-1.3 points), as have business expectations (-0.7 points). Thus, the gap between the business climate of SMEs and large enterprises that emerged in early 2018 is widening further. Particularly remarkable is the disparity between situation assessments, which are almost 22 points higher in the SME sector than in large enterprises. While the latter rate their situation unusually poorly at -9.5 balance points, most SMEs are still content with their business situation.

The split between SMEs of different industries also proves to be persistent. Manufacturers and the closely connected wholesale sector are very pessimistic. On the other hand, confidence among retailers and, above all, building and civil engineering firms continues on an unusually high level.

KfW economist Dr Philipp Scheuermeyer said: “The industrial recession spilled over to wholesalers and parts of the services industry in the course of the year, and currently there is no end in sight. The causes for the problems remained largely unchanged during the survey period. A hard Brexit on 31 October has become less probable as a result of legislation passed by the UK Parliament, but it cannot yet be ruled out at this date nor, in particular, at a later date. The trade conflict between China and the US is unpredictable despite minor signs of easing tension. The high political uncertainty is leading to investment restraint in Germany, but globally too, and this is harmful to German industry, which is generally very cyclical.”

The labour market is still reasonably robust. The KfW ifo employment expectations are trending downward but still remain just barely above the long-term average in the more labour-intensive SMEs. The skills shortage is causing many businesses to put off job cuts for as long as possible despite their pessimistic business expectations. But the longer the cyclical downturn continues, the more likely that is to change.

KfW Research expects positive growth of 0.4% for all of 2019, but only because of the good start to the year. For 2020 there is hope that growth will normalise around the middle of the year, which could raise the annual growth rate to 0.6%.

The current KfW-ifo SME Barometer can be downloaded from www.kfw.de/mittelstandsbarometer


Portrait Wolfram Schweickhardt


Wolfram Schweickhardt


+49 69 74 31 17 78


+49 69 74 31 32 66