Business sentiment among small and medium-sized enterprises (SMEs) in Germany declined in August, according to the latest KfW-ifo SME Barometer. The business climate index fell by 0.6 points to -13.1 balance points after five months of improvement. Both current assessments and six-month expectations among SMEs saw moderate declines.
The most significant decrease in confidence was observed in the services sector, while retail and manufacturing experienced only slight drops. In contrast, sentiment improved somewhat in the construction and wholesale sectors. The report notes that manufacturing firms’ mood may reflect disappointment with a recent tariff agreement with the United States, as export expectations dropped by 3.8 points to -13.8 balance points.
In comparison, large enterprises reported an increase in business sentiment, rising by 1.5 points to -18.1 balance points for August. Although their view of the current situation was slightly more negative, their outlook for future business improved considerably.
"The mood among German businesses is patchy. The US protectionism is putting obstacles in the way of export-oriented businesses, and the domestic economy, too, continues to falter,” said Dr Dirk Schumacher, Chief Economist of KfW.
“Towards the end of the year, and particularly in 2026, the massive increases in government spending will likely drive growth in Germany and lift the mood among businesses.”
KfW offers various support programs for SMEs on behalf of the Federal Government.