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Press Release from 2020-11-09 / Group

KfW-ifo SME Barometer: Worry lines among SMEs are deepening

  • Second wave of infections is leading to a slight drop in SME sentiment
  • Large enterprises’ expectations are collapsing
  • Partial lockdown in November will interrupt the economic recovery

Sentiment among Germany’s small and medium-sized enterprises has begun to sour as they face a second coronavirus wave, the KfW-ifo SME Barometer for October has revealed. During that month the containment measures were still moderate and mostly local, and they hardly disrupted business activity, but tighter restrictions were already foreseeable given the rapid spike in new infections. As a result, SME business confidence fell by 0.4 points, mostly because of SMEs’ lower expectations. With a decline of 1.8 points to -5.7 balance points, the drop in expectations among SMEs remains moderate overall. By contrast, their business situation assessments improved slightly in October (+0.9 points to -9.6 balance points) but remained well below the pre-crisis level.

Large enterprises’ situation assessments and expectations moved even more strongly in the opposite direction. Their business assessments improved noticeably by 6.6 points to -16.6 balance points, while their expectations dropped sharply by -7.4 points. On balance, large enterprises’ business sentiment changed only minimally (-0.2 points to -6.3 balance points).

A look across the sectors shows that confidence levels in manufacturing remained on an upward trajectory in October. Business sentiment continued to rebound in large companies as well as SMEs (+3.8 points to -6.4 and +3.1 points to -8.1 balance points). Export-oriented manufacturers in particular are likely to be benefiting from the strong recovery in China and the US. However, the rise in sentiment in both size classes of the manufacturing sector is exclusively due to improved situation assessments. Weakening business and export expectations, especially among large industrial firms, point to slowing momentum.

“In October the worry lines among SMEs deepened again because of the rapid spread of new COVID-19 infections and foreseeable business restrictions”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW. “The partial lockdown announced for November in Germany and almost all other European countries will interrupt the economic recovery for the time being. But the fairly prompt response, at least in Germany, means there is a good chance that the damage can be confined to the particularly contact-intensive sectors. The planned compensation payments are not just important for those businesses that have already been hit hard and now have to close again, but are designed to prevent worse outcomes for the aggregate economy. In Germany many sectors, particularly manufacturing, can continue to operate with relatively fairly little disruption”, Köhler-Geib added. “I therefore expect only a moderate decline in economic output in the current quarter. But there is still a long winter ahead, and the downside risks are therefore high.”

The KfW-ifo SME Barometer is available (in German only) at: www.kfw.de/mittelstandspanel


Portrait Christine Volk


Christine Volk


+49 69 74 31 38 67


+49 69 74 31 32 66