KfW-ifo SME Barometer: SME business confidence not yet affected by coronavirus in February

• Sentiment among German SMEs was up, driven by higher expectations
• Confidence fell among large enterprises
• Effects of coronavirus likely to put additional strain on the economy

In February, small and medium-sized enterprises in Germany did not appear to be concerned about the coronavirus outbreak which was still concentrated in China at the time. According to the current KfW-ifo SME Barometer, SME business sentiment rose again by a moderate 0.8 points, after a dampener in the previous month. Now at 0.7 balance points, however, it continues to hug the zero line which signals average economic performance. The driver behind the improved sentiment was a rise in expectations (+1.6 points to -7.9 balance points). Business situation assessments, by contrast, are unchanged at 9.9 balance points.

On the other hand, the impact of the coronavirus already began to be felt by large enterprises, whose business confidence suffered a setback for the first time since October 20219, falling by -2.3 points to -9.4 balance points. Situation assessments in particular deteriorated (-3.1 points to -6.2 balance points), and the continuing pessimistic business expectations fell again (-1.7 points to -12.7 balance points). The drastic measures introduced to fight the coronavirus in China are having a particularly serious impact on the sales situation and supply chains of large manufacturers. Vast sections of the Chinese economy have been virtually paralysed since the end of January. Restrictions have been imposed on public life, significantly limiting consumption.

Last year, China was not only the third most important destination of German exports but, above all, the main country of origin of German imports. “SMEs’ stronger focus on the German and European internal market makes them less susceptible to global developments. But even if their confidence remained strong in February, they are not immune to the effects of the coronavirus outbreak. Ever since the virus began to spread in Italy, we have had to expect a further dampener to be added to the already subdued economic momentum in Germany”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW.

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