German SMEs in May: Taking a breather after the all-time high

  • SME business confidence was down slightly in May but remained on a very high level
  • Large enterprises are more optimistic
  • German economy continues to run smoothly

Frankfurt am Main, 13-Jun-2017 — /EuropaWire/ — In May sentiment among Germany’s small and medium-sized enterprises dropped just slightly below the previous month’s all-time high. The core sentiment indicator of the KfW-ifo SME Barometer fell by 2.0 points to 23.0 balance points but continued on an outstanding level. The drop is mainly due to their less positive assessments of the current business situation (-3.0 points to 35.4 balance points). In contrast, business expectations dipped only moderately by 1.0 points to 10.7 balance points.

“Taking a breather after the all-time high – that was the maxim for SMEs in May. The drop in confidence is no reason for concern as the fundamental upward trend is continuing. The German economy is running smoothly”, said Dr Jörg Zeuner, Chief Economist of KfW Group.

Much of the drop in confidence in May was due to a correction in the retail and wholesale sectors, which were particularly affected by variations in seasonal consumption patterns – and thus to technical factors. The effects of the dates of the Easter holiday – which was in March in 2016 but in April in 2017 – were probably accounted for only insufficiently by the seasonal adjustment procedure, as illustrated by the up and down of the sentiment indicators in these sectors over the past two months. The fundamental outlook for private consumption remains good, however, not least thanks to German businesses’ continuing expansive recruitment plans.

The economy is set for growth from the viewpoint of large enterprises as well. In May they were much more optimistic about the future than in April. Not least, this probably reflects the relief of large, mostly export-driven enterprises – especially large manufacturers – at the result of the election in France which now offers the opportunity to put Europe and the currency union on a more stable foundation. At the same time, the global economy is picking up and so is international demand for German products. Specifically, large enterprises’ business expectations rose by 3.7 points to 11.2 balance points, which was very close to the level for SMEs. Their situation assessments, however, fell by 3.8 points to a still high level of 34.2 balance points, so that business confidence among large enterprises moved virtually sideways in May (+0.1 points to 22.6 balance points).

“The return to stronger global growth and the great opportunity of the presidential election result in France for reviving the European project are encouraging”, said KfW’s Chief Economist Zeuner. “Businesses should now invest more vigorously than previously assumed. That is why we recently lifted our growth forecast for Germany by 0.2 percentage points to 1.6% for both 2017 and 2018. Given the ongoing uncertainty in the relationship with the USA and the UK, which is likely to continue for some time to come, these are good prospects.”



Ms. Christine Volk
Phone +49 69 74 31 38 67
Fax +49 69 74 31 32 66


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