The credit hurdle for German industry and trade rose somewhat in November, having fallen in the previous month. Currently 42.9% of the firms assess banks’ lending policies as restrictive. In October 41.7% of the survey participants expressed this opinion. The financing situation of the firms remains critical and poses a risk for the economic recovery.

In manufacturing the credit constraints increased for all company sizes. For the large firms the rise was 1 percentage point to 52.5%, for the mid-sized firms 2.5 percentage points to 43.3% and for the small firms 1.3 percentage points to 39.6%.

The Ifo Institute for Economic Research at the University of Munich carried out the monthly survey.

In construction, the credit hurdle is also slightly higher. Of the surveyed firms 47.4% report restrictive bank lending policies compared to 47.1% in October. In wholesaling/retailing the complaints of banks’ hesitancy to lend money also grew. Compared with 37.6% in the previous month, now 38.6% of the distributing firms have assessed banks’ lending practices as “restrictive”.

The credit constraint indicator is based on ca. 4,000 responses of firms in industry and trade from the sectors manufacturing, construction, wholesaling and retailing. The firms are asked to respond to the following question: “How would you assess the current willingness of banks to extend credit to businesses”?

The answers to choose from are “accommodating,” “normal” and “restrictive..The credit constraint is calculated from the percentages of the responses to the last of the three categories.

For the compilation of the credit constraint indicator for German industry and trade, the percentage shares from manufacturing, construction and retailing and wholesaling are weighted with the average credit volume of these sectors in 2005.