SMEs are becoming increasingly nervous

Frankfurt am Main (ots) -

- SME business sentiment drops for the third month in a row
- Companies react sensitively to financial market turmoil and
Brexit debate
- Real economy, however, remains on track

The pessimism caused by the financial market turmoil and
unresolved issues in Europe, especially in connection with the Brexit
debate, has increasingly carried over to Germany's small and
medium-sized enterprises. The KfW-ifo SME Barometer shows that SME
business confidence fell noticeably by 3.8 points to 10.9 balance
points in February. That is the third consecutive month-ly decline.
In particular, SMEs are increasingly concerned that the outlook for
2016, which was positive until recently, could suddenly deteriorate.
Business expectations of small and medium-sized enterprises dropped
sharply by 5.3 points to -1.1 balance points. This is the first time
since October 2014 that expectations fell below the zero line, which
represents the average value since 1991. The current business
situation, in contrast, is still seen exceptionally positively by
SMEs despite a dip of 2.3 points to 23.0 balance points.

In difference to the previous month, the downturn in sentiment
among SMEs is spreading beyond export-oriented manufacturers.
Sentiment indicators fell on a high level in all SME sectors,
particularly in the small and medium-sized retail sector. Among large
enterprises the downward spiral in sentiment that had begun in the
previous month continued almost unchecked in February, falling by 4.8
points to 3.2 balance points. With situation assessments remaining
nearly stable, this decline is almost exclusively due to the drop in
expectations.

'It is hard to stay calm in light of the KfW-ifo SME Barometer's
negative Feb-ruary results. But still, the great intensity of the
decline in what is fundamentally an unchanged real economic
environment is a particularly strong indication that sentiment is
being weighed down by acute fears and concerns, and not by actual
economic trends, said Dr Jörg Zeuner, Chief Economist of KfW Group.
He added that although downward risks were rising it was too early to
throw in the towel. 'The fundamental conditions for a continuing
upswing in Germany remain favourable, with both construction and
private and public consumption expenditure driving the domestic
economy. And thanks to the recovery of many smaller countries, the
global economy will presumably grow slightly more strongly. We expect
Germany's economy to grow 1.7% this year. Nevertheless, in the months
ahead we will have to monitor very closely whether the slump in
sentiment will trigger a self-fulfilling downward spiral -
particularly through the avenue of investment restraint which, from
today's perspective, is excessive.'

The latest KfW-ifo SME Barometer can be downloaded from
www.kfw.de/mittelstandsbarometer.

Pressekontakt:
KfW, Palmengartenstr. 5 - 9, 60325 Frankfurt
Kommunikation (KOM),Christine Volk,
Tel. +49 (0)69 7431 3867, Fax: +49 (0)69 7431 3266,
E-Mail: presse@kfw.de, Internet: www.kfw.de