Improved optimism in Germany's small and medium-sized enterprises, according to KfW.
The atmosphere in the boardrooms of small and medium-sized businesses improved significantly as we entered springtime. The sentiment scale, which is a measure of the economic climate, rose by 5.2 points from March to April, registering at -11.3 points. This data was shared by both the German state development bank KfW and the Munich-based Ifo Institute.
KfW's Chief Economist, Fritzi Köhler-Geib, shed some light on the situation. "[SMEs] business climate is on an upward trend for the third time in a row," she explained. "This means that, according to a general rule of thumb, the shift in sentiment towards positivity has been accomplished in this part of the economy."
Despite the dark outlook portrayed by the sentiment indicators previously, the trend is hopeful. Köhler-Geib remains optimistic that the economy will once again see moderate growth by the end of 2024, with a more significant pick-up in growth happening in 2025. She attributed this improvement to a sharp decrease in pessimism commonly found among SMEs when it comes to the near future. Their expectations catapulted by 7.1 points from March to April, falling to -11.8 points.
The current situation was also graded more favourably, but the change was less noticeable - marking only a 3.2-point increase to -11.2 points. The construction industry within small and medium-sized businesses greatly improved, with a 5.9-point surge in the sentiment barometer, positioning it at -24.0 points. The mood among large companies also benefitted, yet to a much lesser degree. They saw an increase of 2.3 points to -17.3 points.
"Both large companies and SMEs are now more assured about the upcoming months than they were at the start of the year," Köhler-Geib added. "The economic drought is likely to be mainly over."
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The improved optimism in Germany's small and medium-sized enterprises, as noted by KfW, is a clear indication of a shift in the business climate for this sector. Moreover, KfW's Chief Economist, Fritzi Köhler-Geib, suggested that the middle class, being a significant part of SMEs, is experiencing a change of mood, as their expectations for the future have significantly improved.
Source: www.ntv.de
