Sentiment in the German SME sector deteriorated for the sixth time in a row in November. According to the KfW-ifo SME Barometer, the business climate is far below the long-term average. The main reason for this is that small and medium-sized enterprises rated their current business situation significantly worse than in the previous month. Only the retail sector is a small ray of hope.
With a decline of 0.9 points, the business climate now stands at minus 20.5 points - well below the long-term average, which is defined by the zero line. These are the results of the KfW-ifo SME Barometer. KfW analyses the results of the ifo economic surveys for this purpose, broken down by company size classes and main economic sectors.
Within the business climate index, the assessment of the current business situation fell by 2.2 points to minus 21.8 points. This continues the downward trend that has been ongoing since mid-2022. The However, business expectations for the next six months improve slightly at a low level by 0.4 points to minus 19.4 points.
It is pleasing to note that the business climate in the SME retail sector is brightening. Since August, the business climate and, in particular, the assessment of the situation have been improving, which suggests that Retail sales also increased in the current quarter following growth in the third quarter. The mood in the SME sector has also improved slightly. The the threat of protectionist measures by the USA seem to be leaving German SMEs, which are more focussed on the domestic market, cold at the moment.
The situation is different for large industrial companies. They rate both their current business situation and, even more so, their future prospects significantly worse than a month or a year ago. The Overall business climate index for large companies falls in November by 2.6 points to minus 22.9 points.
Employment expectations continue to deteriorate in both large companies and SMEs; in absolute terms, they are far lower in large companies than in SMEs. Especially in industry, wholesale and large retailers many companies are planning to reduce the number of their employees.
„The SME business climate in November is as gloomy as grey autumn weather. There are practically only rays of hope from the retail sector, where a tentative recovery trend has emerged, at least among small and medium-sized enterprises. SMEs have so far been an anchor of stability in terms of employment expectations. However, the situation has gradually deteriorated here too and it is unclear how long companies will be able to hold on to their employees when production capacities are underutilised.“
Dr Philipp Scheuermeyer, Economic expert at KfW Research
Source: KfW
