Weak business climate in the SME-MEM sector
The Swissmechanic SME-MEM business climate index remained in negative territory for the fifth time in a row in July 2024. A weak industrial economy continues to weigh heavily on SMEs. This is compounded by structural challenges. The lack of orders is a particular challenge for SMEs-MEM.
The mood in the industry continued to deteriorate in the summer: more than two thirds of the companies surveyed rated the business climate as unfavorable. The Swissmechanic business climate index, the pulse meter of the SME MEM, has been in negative territory for over a year now.
Decline in orders remains the biggest challenge for SME-MEM
The lack of orders remains the biggest challenge for the companies surveyed. In July 2024, around half reported a fall in incoming orders and sales compared to the same period last year. Around a quarter of respondents have secured production for a maximum of one month. While SME-MEMs have previously been cautiously optimistic about the future despite the difficult economic environment, the outlook for the third quarter of 2024 now tends to be pessimistic.
Decline in margins burdens company: Equity dwindling
Another problem is falling margins. More than one in three companies have been reporting declines for two years now. In the second quarter of 2024, the margins of more than 40% of companies fell compared to the same quarter of the previous year. In this context, the increase in companies that have stated that they are not investing due to a lack of equity is worrying. This trend indicates that the first SME MEMs, which are often financed with their own funds, are slowly running out of steam.
Interest rate cut could boost demand for capital goods
In view of lower inflation, experts expect a further reduction in the key interest rate by the end of the year. As the umbrella organization of the MEM SMEs, Swissmechanic would very much welcome such an adjustment. After all, the two interest rate cuts already made in 2024 each had a very positive impact on the heavily export-oriented MEM industries.
General conditions must be improved
In view of the structural challenges and the volatile geopolitical situation, Swissmechanic also believes that politicians have a duty to improve the framework conditions for Swiss SMEs as a matter of priority. SMEs are the backbone of the Swiss economy. The Swiss workplace is an essential factor for Switzerland's prosperity. Swissmechanic is committed to stemming the tide of regulation. This is because bureaucratic processes currently tie up a considerable 15% of SME MEM personnel resources, according to the Swissmechanic Economic Barometer of May 2024.
Source: www.swissmechanic.ch
