KfW Research: Sentiment among SMEs is not recovering at the end of the year either

• KfW-ifo SME Barometer dips for the seventh consecutive month
• Industrial firms are particularly pessimistic
• Employment expectations continue to worsen

Confidence among German SMEs is not rising at the end of the year either. On the contrary, the business climate index fell in December for the seventh consecutive month – by -1.6 points to now -22.1 balance points. That puts the index well below the long-term average represented by the zero line.

Even so, the situation assessment component of the business climate index rose by 1.2 points to -20.6 balance points. This moderate improvement, however, has been shattered by the significantly more pessimistic six-month business expectations. They plummeted by 4.2 points to -23.8 balance points.

These are the findings of the KfW-ifo SME Barometer. KfW evaluates the results of the ifo economic surveys by company size classes and main economic sectors.

The steepest drop in sentiment was reported by small and medium-sized industrial enterprises and wholesale enterprises closely connected to them. Export expectations in industry, on the other hand, fell only slightly and, at -15.1 points, are currently notably less pessimistic than the overall business expectations of the industrial sector.

Sentiment among large enterprises deteriorated less than among SMEs in December. Business situation assessments improved here as well, by 1.9 points, while business expectations fell sharply by 3.1 points. Their business climate index fell by 0.6 points overall to -27.1 balance points.

Employment expectations continue trending downward among both SMEs and large enterprises. Many businesses, especially manufacturers, wholesalers and large retailers, are planning job cuts.

“The widespread news reports about layoffs in German corporations are weighing on sentiment. If well-paid jobs in industry are lost, loss of purchasing power or uncertainty among consumers could also spill over to other sectors”,

said Dr Philipp Scheuermeyer, economic expert at KfW Research.

“At the same time, negative business expectations in practically all sectors are weighing on enterprises’ employment and investment plans.”

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

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