SMEs with very cautious price expectations despite high spirits

Frankfurt (ots) -

- Situation for SMEs marginally better; expectations slightly
worse
- Large-scale enterprises noticeably more optimistic than in the
previous month
- Price expectations appear to point towards deflation

The upturn is still on track. According to the current KfW ifo SME
Barometer, neither the conflict in eastern Ukraine, nor the economic
slowdown in China, nor the risk of falling consumer prices in Europe
are significantly detracting from the sentiment. With 22.1 balance
points in April, the SME business climate appeared to have barely
changed from the previous month's three-year high. Even the
assessments of the current situation and the business expectations
are holding steady at what is a virtually constant high level:

- The assessments of the current business situation increased
marginally by 0.3 points to 31.1 balance points - a
two-and-a-half year high that indicates solid economic growth
going into the second quarter.

- Future business expectations, on the other hand, are virtually
as good (-0.8 points to 13.0 balance points). This consolidation
is plausible given the high level that has already been reached,
as further improvements will become increasingly difficult.

In contrast, large-scale enterprises were noticeably more
optimistic than they were in March. After declining in the previous
month, their business expectations increased by 1.9 points to 15.1
balance points in April. As large companies' assessments of the
current situation only fell slightly at the same time (-0.5 points to
25.2 balance points), their business climate climbed to 20.4 balance
points after increasing 0.8 points and thus reached the highest level
since July 2011 - as was also the case back in February of this year.

"However, we are concerned about companies' price expectations,
which have been low for some time now despite consistently high
climate indicators in both company size categories," explained Dr
Jörg Zeuner, Chief Economist of the KfW Group. Sales price
expectations, meanwhile, recovered slightly in April (SMEs: +0.4
points to -0.9 balance points; large-scale enterprises: +2.0 points
to -0.8 balance points). Yet when measured against the positive
economic sentiment, they are atypically cautious and remain below the
long-term average - as they have been for most of the last two years.
"This indicates that the pressure on prices throughout Europe is
clearly leaving its mark in Germany too - despite perceptibly better
capacity utilisation compared with many other eurozone countries,"
added Dr Zeuner.

He went on to state that there is still confidence regarding the
economy. "Even if the quarterly growth rates drop again during the
course of 2014 to a more moderate level compared with the start of
the year, we can expect at least 2% economic growth this year," he
forecasted. In the international arena, the US proved to be a driving
force yet again, while China is apparently proceeding very cautiously
with respect to converting its national economy. Dr Zeuner believes
that these are developments worthy of confidence. He also adds that
the poor prospects in Europe and the unhealthily low European
inflation rates are still risks which could force the ECB to take
action - and justifiably so.

A detailed analysis including data tables and charts relating to
the current KfW ifo SME Barometer can be found at
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: Christine.Volk@kfw.de, Internet: www.kfw.de