Sentiment among small and medium-sized enterprises (SMEs) in Germany has shown a slight improvement at the beginning of the year, according to the KfW-ifo SME Barometer. The business sentiment index increased by 0.6 points in January, reaching -21.4 balance points. Despite this rise, the index remains below its long-term average.
The KfW-ifo SME Barometer evaluates economic surveys conducted by ifo based on company size and sector. This marks the first upward movement in the index since April 2024.
The six-month expectations component saw a minimal increase of 0.1 points to -23.6 balance points, indicating persistent pessimism due to political uncertainties in Germany and potential trade conflicts with the United States. However, assessments of the current situation improved by 1.2 points to -19.3 balance points, hinting at a possible stabilization trend.
The services sector was the only one reporting improved sentiment among SMEs, while other sectors remained pessimistic about economic conditions.
In contrast, large enterprises experienced a decline in their business climate index by 0.9 points to -28.0 points in January, with their outlook deteriorating despite slightly better views on their current situation compared to December.
Dr Klaus Borger from KfW Research commented on these findings: “We should be under no illusions. The slight improvement in sentiment among SMEs in January was only a drop in the ocean after what has now been a five-year stagnation across the broad economy and given the loss in international competitiveness.”
He further noted that significant improvements would require strategic monetary policies and coherent responses from policymakers and businesses: “This is all the more the case as the improvement is being driven almost exclusively by service providers, while the mood among large export-oriented industrial firms is increasingly worsening."
KfW continues to support SMEs through various promotional programs initiated by Germany's Federal Government.