Germany’s vital SME sector is exhibiting deepening distress, signaling a potential drag on the nation’s broader economic outlook. New data released by IT service provider Datev reveals a concerning 2.7% decline in sales for medium-sized businesses in September, adjusted for price and seasonal factors, compared to the same period last year. This reversal undermines any tentative signs of stabilization observed during the summer months, according to Datev’s chief economist, Timm Bönke.
The downturn is particularly acute in key sectors. The hospitality industry recorded a 4.5% decrease in revenue year-on-year, followed by construction (down 2.9%) and manufacturing (down 2.8%). This widespread contraction underscores a growing concern amongst economists and policymakers regarding the health of Germany’s traditionally robust SME landscape.
Worryingly, medium-sized enterprises are currently failing to provide a positive contribution to employment. September saw a 0.1% decrease in employment within these businesses, a consequence of being squeezed between dwindling sales and rising labor costs. Wage and salary increases averaged 4.1% year-on-year, a deceleration from previous rates, yet still surpass the current inflation rate of 2.4%. This dual pressure – declining revenue and escalating costs – paints a precarious picture for many SMEs.
Robert Mayr, Chairman of the Datev Cooperative, directly attributed the malaise to a “policy standstill” hindering economic reform. This oblique criticism suggests a growing frustration within the business community regarding perceived inaction by policymakers-a sentiment that could escalate as economic challenges persist. The Datev Mittelstandsindex, derived from anonymized advance VAT returns and other data from over a million medium-sized businesses, provides a remarkably timely and granular view of the economic climate, often outpacing official statistics. This rapid insight into the condition of the backbone of the German economy is proving increasingly valuable and the current trends signal a need for immediate and decisive action to prevent further deterioration and support the viability of Germany’s critical SME base.