KfW Research: Sentiment among Germany’s SMEs has worsened for the third consecutive month

• KfW-ifo SME Barometer has dropped sharply
• Major question marks hang over the economic recovery again

In July, business confidence in Germany’s small and medium-sized enterprise sector deteriorated for the third month in a row, this time significantly. It fell by 4.2 points on the preceding month to -17.7 balance points. Negative indicator values point to a below-average economic performance.

The situation assessment component of the business climate index fell by 4.2 points to -15.9 balance points. The indicator is thus almost as low as it was at the start of the year. Six-month business expectations also plunged, falling 4.0 points to -19.7 balance points.

KfW evaluates the results of the ifo economic surveys for the KfW-ifo SME Barometer, broken down by company size classes and economic sectors.

The drop in confidence affected small and medium-sized enterprises of all sectors in July. The services sector was hit hardest, followed by retail. Services businesses, however, still have a much more positive view of the situation than enterprises from other sectors.

Confidence among large enterprises deteriorated in July as well. With a drop of 2.1 points to -22.0 balance points, the decline was slightly less pronounced than in the SME sector. However, sentiment among large enterprises has already been well below that of small and medium-sized enterprises over the past months, so that both are now converging.

“Confidence among German businesses has dropped for the third consecutive month. This is more than a purely expectations-driven sentiment downturn because the business situation of the surveyed companies has also deteriorated again”,

said Dr Fritzi Köhler-Geib, Chief Economist of KfW.

“After the trend reversal in the business surveys and the slight decline in GDP in the second quarter, major question marks now hang over the previously expected economic recovery again. But there is also a glimmer of hope among the current indicators. The recovery in consumer sentiment, in particular, is continuing.”

The current KfW-ifo SME Barometer can be downloaded from:

KfW-ifo SME Barometer | KfW