The business climate among German small and medium-sized enterprises improved noticeably in July 2026. The KfW-ifo Business Climate Index for small and medium-sized enterprises rose by 4.0 points to -17.3 points. This was driven primarily by significantly improved expectations for the coming six months. At the same time, sentiment among businesses remains subdued overall.

Business expectations among small and medium-sized enterprises rose by 6.9 points to -17.2 points in July. By contrast, the assessment of the current business situation improved only slightly, by 0.8 points, to -17.6 points. Despite this rise, the business climate thus remains well below the long-term average, which is marked by the zero line in the KfW-ifo SME Barometer.

The improvement in sentiment is evident across all economic sectors surveyed. The manufacturing sector recorded the strongest rise, up by 9.7 points to -16.5 points. In the retail sector, the business climate improved by 8.8 points to -19.6 points, whilst in the wholesale sector it rose by 7.6 points to -18.6 points. The main construction sector rose by 2.4 points to -13.9 points, whilst the services sector rose by 2.6 points to -16.2 points. In the manufacturing sector, both expectations and the assessment of the current situation have improved.