Sentiment and reality in SME sector diverge widely

Frankfurt (ots) -

- SME business climate drops for the seventh time in a row
- Expectations considerably weaker than current situation
- Sentiment low could soon be reached

Despite the bond purchasing programme announced by the European
Central Bank at the beginning of the month, the mood in the German
economy has again worsened in September. The business climate among
SMEs decreased by 2.2 points to 3.7 balance points, meaning the most
important indicator of the KfW-ifo SME barometer declined for the
seventh time in a row. The assessments of the current business
climate (-1.7 points to 18.6 balance points) and the expectations for
the coming six months (-2.5 points to -10.8 balance points)
contributed about equally to this result.

The business climate at large firms also continued to decline in
September, namely by -2.2 points to -1.9 balance points. As a
result, the overall business climate of large firms slipped below the
zero line for the first time since February 2010. The noticeably
worse sentiment compared to SMEs is likely due to the stronger
international integration of large enterprises in particular. Thus
they are directly affected by the global slowdown and the recession
in many countries of the euro area. In contrast, the SME sector,
which across the board is more strongly oriented towards the domestic
market, is benefiting from continuing robust domestic demand in
Germany and particularly from the strong upward trend in private
consumption and housing construction.

The German labour market is expected to move sideways with
relatively high employment and an unchanged unemployment rate. In the
future, economic impulses for domestic demand must mainly come from
the development of wages and no longer from increases in employment.
Employment expectations (SME sector: -0.9 points to 5.9 balance
points; large enterprises: -2.5 points to 6.2 balance points) dropped
again in September. Sales price expectations were also weaker across
both company size categories (SMEs: -0.9 points to -1.2 balance
points; large enterprises: -1.3 points to -2.8 balance points). For
over a quarter of a year they have kept to below the long-term
average and are not showing signs of inflationary pressure.

"Germany is facing an economic test in the autumn and winter. The
gap between the above-average positive assessment of the current
situation and the poor expectations for the coming months has seldom
been so wide. In the coming months we expect a turnaround in business
expectations. The easing of the euro crisis initiated through the
bold bond purchasing programme, the initial positive signals from the
American labour and construction markets and possible loosening of
monetary and fiscal policy in many emerging economies should soon
again elevate the mood. Foreign orders in the industrial sector had
already stabilised in July and August. In 2013 we expect real growth
in Germany of about 1.5%," said Dr Jörg Zeuner, Chief Economist of
KfW.

A detailed analysis with data tables and charts on the current
KfW-ifo SME Barometer are available under
www.kfw.de/mittelstandsbarometer.

Pressekontakt:
KfW, Palmengartenstraße 5-9, 60325 Frankfurt
Kommunikation (KOM), Mr. Wolfram Schweickhardt
Tel. 069 7431-1778, Fax: 069 7431-3266,
E-Mail: Wolfram.Schweickhardt@kfw.de, Internet: www.kfw.de/newsroom