The sentiment among German small and medium-sized enterprises (SMEs) continued its downward trajectory in November, marking the sixth consecutive month of decline. According to the KfW-ifo SME Barometer, business sentiment dropped by 0.9 points to -20.5 balance points, remaining below the long-term average.
The KfW-ifo SME Barometer evaluates the results of ifo economic surveys based on company size and main economic sectors. The assessment of the current business situation fell by 2.2 points to -21.8 balance points, continuing a trend that has persisted since mid-2022. However, six-month business expectations showed a slight improvement, rising by 0.4 points to -19.4 points.
Despite the overall decline, there was some positive news from the retail sector among SMEs. Business confidence among SME retailers has improved since August, with better situation assessments suggesting an increase in retail turnover for the current quarter after growth in the third quarter. Sentiment also improved slightly among small and medium-sized industrial firms.
In contrast, large industrial enterprises reported a more negative view of their current business situation and outlook compared to previous months and last year. The business climate index for large enterprises decreased by 2.6 points to -22.9 balance points.
Employment expectations have worsened for both large enterprises and SMEs, with many businesses planning workforce reductions, particularly in industrial firms, wholesalers, and large retailers.
"SME business sentiment in November was as bleak as grey autumn weather," stated Dr Philipp Scheuermeyer, an economic expert at KfW Research. "Virtually the only sector with bright spots was retail, where a tentative recovery has begun among small and medium-sized enterprises."
Dr Scheuermeyer added that while SMEs have been stable regarding employment expectations, it is uncertain how long they can maintain their workforce given underutilized production capacities.
KfW offers various promotional programs for SMEs on behalf of the Federal Government.