The business climate among small and medium-sized enterprises in Germany has improved.
Smaller and medium-sized businesses in Germany are witnessing positive changes in the economic climate. The KfW-Ifo Small Business Barometer, released on Wednesday, reveals a fourth consecutive month of improved sentiment among these firms. Although there was a significant uptick in April, the business climate saw marginal improvement in May, increasing by 0.1 points to reach -11.5 balance points.
Smaller businesses became more cautious about their immediate circumstances, but slightly more positive about their future prospects. Fritzi Köhler-Geib, Chief Economist at the state-sponsored bank KfW, observed, "The upward trend is continuing, but overall, this year's growth will be rather modest."
Köhler-Geib added, "The extremely pessimistic atmosphere among German firms a few months back has now given way to a touch of optimism." She further mentioned that the economic cycle is likely to reach its conclusion. KfW predicts an annual growth of 0.3% for 2022, with a gradual acceleration to 1.2% in 2025.
This optimism is being felt across various industries, excluding service providers. Improvements were seen in wholesale and retail trade, manufacturing, construction, and the retail sector. However, Köhler-Geib noted, "The mood among large companies is disheartening." The business climate in May worsened by 0.8 points to reach -18.2 balance points. Large firms were slightly more upbeat about the future, yet they assessed their current situation more unfavorably.
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Despite the general improvement in the business climate, the middle class may still find it challenging to fully benefit from this economic uptick due to rising costs and stagnating wages. In the midst of this economic transformation, businesses need to closely monitor the evolving business climate to adapt and succeed.
