07/20/2021 | Press release | Distributed by Public on 07/20/2021 08:36
Credit demand of enterprises in Germany continues on a low, below-average level. The KfW ifo Credit Constraint Indicator shows that the share of SMEs that were in loan negotiations with their banks fell by 1.1 percentage points to 19.5% in the second quarter. This was the lowest level recorded since the survey began in 2017. The share of large enterprises seeking loans also fell again by 1.3 percentage points to 27.7%, after a minimal rise in the previous quarter. Among the enterprises that are still requesting loans, bright spots appear particularly in the SME sector. The KfW ifo Credit Constraint Indicator for SMEs has dropped again noticeably for the first time since March 2020 and is now at 18.4% (previous quarter 22.5%).
The lifting of pandemic restrictions is mainly benefiting small and medium-sized service providers (-6.7 percentage points to 20.3%), but also the heavily export-oriented manufacturing sector (-6.1 to 15.4%). Banks are restricting their lending more to SMEs in the construction sector (+4.4 to 11%) and in wholesale and retail (+4.3 to 25.6% and +1.6 to 29.5%). Retail is the only sector in which large enterprises find it easier to successfully complete loan negotiations (-8.7 to 17.5%). Banks are restricting their lending much more to firms in the construction sector (+18.8 to 47.6%) and services (+3.2 to 13.6%).
'The main thing which businesses need in order to overcome the consequences of the pandemic is predictability, but that is something they still don't have. Uncertainty remains high, not least as a result of new virus variants such as Delta+, which could stop the recovery in its tracks. Supply shortages also continue to reduce businesses' investment activity and, hence, credit demand', said Dr Fritzi Köhler-Geib, Chief Economist of KfW. 'One example where this is evident is the construction sector. Although it has shown great strength all the way through the pandemic, businesses of all sizes are borrowing less. At the same time, banks are restricting their lending to construction firms that still require loans. One explanation might be the significant recent increase in raw materials such as timber, as well as generally higher construction costs.'
The KfW ifo Credit Constraint Indicator is available for download at KfW-ifo-Kredithürde.