KfW-ifo SME Barometer - Sentiment brightens up

The mood among SMEs in Germany improved in March. Both assessments of the current business situation and expectations for the future are at their highest level since the outbreak of war in Ukraine.

Good news for German SMEs: the latest KfW-ifo SME Barometer shows that the mood among small and medium-sized enterprises continued to improve in March. Compared to the previous month, the business climate index rose by 4.9 points to -3.2 balance points.

Sentiment in all main economic sectors of the German SME sector rose again. The service sector in particular recorded a strong increase of 7.6 points to a slightly positive 1.7 balance points. The retail sector leads the sentiment table with an increase of 3.5 points to 3.2 balance points. The improvement in both climate components is particularly pleasing: Business expectations rose by 6.7 points to now -10.0 balance points, the best value since the outbreak of the war.

Construction sector and large companies remain under pressure

Construction companies are by far the worst performers among SMEs. Residential construction in particular is currently suffering from the rapid rise in interest rates and the continuing high cost of materials.

The business climate for large companies in Germany shows a positive trend, but the current business situation remains largely negative. The business climate rose by a total of 4.2 points to -8.2 balance points.

The biggest economic concerns have dissipated and confidence is cautiously returning among SMEs

Dr. Fritzi Köhler-Geib, Chief Economist at KfW

Overall, however, the current KfW-ifo SME Barometer gives hope for a positive development of the German SME sector, which continues to hold its own despite the difficult circumstances. Despite a stiff economic headwind, confidence among SMEs in Germany is cautiously blossoming. Although monetary policy and real wage losses are still having a dampening effect, an economic recovery is expected over the course of 2023. SMEs can look forward to a positive business situation and business expectations.

The current issue and the basic data set can be found here on the KfW website

The KfW-ifo SME Barometer

The KfW-ifo SME Barometer is an indicator based on the monthly evaluation of the ifo business surveys and relates specifically to the economic situation of small and medium-sized enterprises in Germany. Around 9,000 companies are surveyed, of which around 7,500 are classified as SMEs. The barometer measures the business climate, i.e. the assessment of the current business situation and business expectations for the next six months. It also measures employment expectations, domestic sales price expectations and export expectations for the next three months. All time series are seasonally and mean-adjusted. The KfW-ifo SME Barometer thus provides information on the current and future economic situation in the SME sector.