Confidence among German small and medium-sized enterprises (SMEs) showed signs of improvement in June, according to the latest KfW-ifo SME Barometer. The business climate index rose for the fourth consecutive month, gaining 0.5 points to reach -14.2 balance points. Although still below the long-term average indicated by the zero line, the upward trend suggests a potential economic recovery.
The KfW evaluates data from ifo Institute’s surveys for its SME Barometer, categorizing results by company size and economic sector. While SMEs' current business situation assessments remained unchanged at -16.6 balance points, their six-month outlook improved by 1 point to -12.2 balance points.
Large enterprises also saw an increase in expectations, with a notable rise of 4.4 points to -9.3 balance points, despite a decline in current business situation assessments.
Dr Dirk Schumacher, Chief Economist of KfW, noted that "the trend indicates that things are about to improve for the German economy after what has been a rather weak summer." He added that "German businesses appear to be anticipating a growing willingness on the part of the US to compromise on trade issues," attributing much of the optimism to increased confidence in Germany's domestic economy.
A particularly positive development was observed among large construction firms, where sentiment rose by 2.5 points to +4.2 balance points in June. This segment was previously noted as having business confidence above historic averages since Russia's invasion of Ukraine.
Dr Dirk Schumacher highlighted that "with their focus on public-sector and below-ground construction, large construction firms have a particularly promising outlook thanks to the Federal Government’s new fiscal package."
The KfW-ifo SME Barometer is available for download online.