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SME business climate at annual high
Frankfurt am Main (ots) -
- A sigh of relief after tensions abate in arguments over reforms with Greece - Considerable improvement in business assessments, while expectations increase slightly - Sentiment picks up among large enterprises
German SMEs breathe once again! The sense of nervousness felt by German SMEs at the beginning of the summer in view of the Grexit risk has subsided thanks to the agreement reached between the European partners and Greece to enter into negotiations regarding a third bail-out package. This is clearly shown by the current KfW-ifo SME Barometer: the SME business climate in July increased by 2.6 points to 17.1 balance points - the highest level in thirteen months.
Both components of the indicator are on the up: The assessment of the current business situation has increased by a huge 4.1 points to 26.4 balance points, while expectations also picked up, growing by 1.3 points to 7.8 balance points. SMEs are once again paying more attention to positive economic drivers such as the labour market and the euro exchange rate, while the nuclear agreement with Iran also is good news for the German economy.
It therefore comes as no surprise that the improvement of the business climate is particularly pronounced in export sensitive economic sectors, such as manufacturing industry and wholesale trade. Nevertheless, the further and considerable uptrend in the retail sentiment to the highest value recorded since March 2011 proved to be particularly impressive - with private consumption going from strength to strength.
The sentiment indicator for large companies recorded growth of 2.4 points to move to 15.0 balance points. As was experienced among SMEs, the rise in business assessments (+4.2 points to 24.7 balance points) was much greater than that in business expectations (+0.6 to 5.2). The relatively moderate improvement in expectation is likely to be attributed mainly to the international environment. In contrast to the increase in domestic demand, the global economy is currently less dynamic - the key factors here being the structural adjustments in emerging countries and, in particular, the drop in growth rates in China. There is hope, however, that the recovery will stabilise in the major euro area countries and the US economy will gradually pick up the pace.
"The German economy has proven to be resilient in a sometimes difficult international environment," commented Dr. Jörg Zeuner, Chief Economist of KfW. The relief in the Greek debt drama, soaring private consumption and the emerging recovery of capital formation in Germany is providing for improved sentiment. Despite the fact that the restrained growth prospects of emerging market countries are dulling optimism on an international level, the outlook remains good: "On balance, the German upswing is likely to generate real growth of at least 1.5% this year," confirmed Zeuner.
The current KfW-ifo SME Barometer (in german only) is available for download at: www.kfw.de/mittelstandsbarometer.