OREANDA-NEWS. German SMEs are continuing to focus on the upturn. According to the current KfW ifo SME Barometer, small and medium-sized enterprises were more upbeat at the start of 2014 than they have been since July 2011. With a broad base across all sectors - indeed, only the retail trade is slightly less satisfied - the SME business climate trend saw an improvement in January to 20.7 balance points (up +0.9 points on December). However, the development differs between the two business climate components:

This time, only the business expectations are helping to improve the climate, increasing by 2.4 points to 17.8 balance points. Just like KfW, the enterprises are focusing on a noticeable economic upturn this year.

In contrast, assessments of the current business situation were down 0.6 points to 23.3 balance points. But the slight setback has not called the general upwards trend into doubt.

Over the last three months, assessments of the current situation were on average 3.2 points higher than in the previous quarter. The prior-year value from January 2013 has therefore even been exceeded by 7.2 points.

The sentiment among large enterprises is also improving - and considerably so after stagnating the month before. Unlike the SMEs, large enterprises' assessments of the current situation (+3.1 points to 17.6 balance points) even saw a slightly stronger increase than expected (+2.7 points to 18.5 balance points). The business climate in large enterprises rose 2.9 points to 18.3 balance points in total. What was especially clear was the improved sentiment of export-orientated large enterprises within the manufacturing industry and wholesale who continue to focus on stabilisation in Europe and the growing global economy.

Since October 2012, business expectations both among SMEs and large enterprises have improved almost three times as much as the assessments of the current situation (SMEs: +27/+10 points; large enterprises: +33/+12 points). But KfW does not see any signs of an expectation bubble that exaggerates the actual strength of the economic upturn. This rather shows the correction of former excessive pessimism. In autumn 2012, expectations in both groups had fallen to recession level - a fear that proved to be unjustified with hindsight.

“In SMEs, the signs continue to point towards an upturn,” said Dr Jorg Zeuner, Chief Economist at KfW. And it's not only the vast improvement in expectations over the last year that is indicative of this. Other indicators, such as ifo export expectations being at a two-and-a-half year high and what has recently been a strong order intake from within Germany and abroad, underline this development too. “Also thanks to what has been relatively mild weather until now, the first quarter could come as a pleasant surprise and presumably compensate for slightly weaker growth than we initially expected in the closing quarter of 2013. We are confident. In 2014, which has just begun, Germany is growing above potential for the first time in three years,” added Dr Zeuner.