Swissmem: The downturn has reached the industry

The downturn seems to have reached the industry: According to the umbrella organization Swissmem, incoming orders in the MEM industries fell by -12.4 percent in the third quarter of 2022 compared with the same quarter of the previous year. In the third quarter, orders from abroad in particular really collapsed compared to the second quarter of 2022, with a drop of -21.1 percent. Thanks to a good first half, orders received over the entire first nine months increased by +2.3 percent compared to the same period of the previous year. The growth momentum is also slowing in terms of sales development. In the third quarter of 2022, sales were still up +4.6 percent on the prior-year quarter. For the entire period from January to September 2022, the year-on-year increase is +9.6 percent. This development affects SMEs and large companies to a similar extent. Capacity utilization in companies peaked in the first quarter of 2022 at 91.9 percent. By the third quarter, it had fallen to 89.5%, although this is still above the long-term average of 86.2%.

(Still) good export figures

According to figures from the Federal Customs Administration, exports of goods by the MEM industries rose by +7.0 percent year-on-year in the first nine months of 2022, reaching a goods value of CHF 54 billion. All major sales markets developed positively. Exports to Asia increased by +13.3 percent, to the USA by +7.8 percent and to the EU by +5.6 percent. All product groups recorded export growth. Exports of metals grew by +11.0 percent, electrical engineering/electronics by +7.5 percent, mechanical engineering by +6.1 percent and precision instruments by +5.3 percent. However, there are also signs of a trend reversal in exports. This is exemplified by exports of goods to Germany, where almost a quarter of all MEM sector exports go. In the third quarter, these fell by -1.0 percent year-on-year. Overall, export growth in the third quarter of 2022 was still +2.7 percent.

Bleak prospects

The situation in most companies in the Swiss MEM industries is still good at present. However, Stefan Brupbacher, Director of Swissmem, puts this into perspective: "The downturn has clearly reached Swiss industry. The sharp decline in incoming orders, particularly from abroad, clearly shows this." In addition, the outlook is becoming increasingly gloomy. The industrial purchasing managers' index (PMI) has been pointing increasingly clearly to a downturn in most markets for two months. Business leaders from Swissmem's membership are also more pessimistic than they were at the beginning of the year. According to the latest Swissmem survey, one third expect lower incoming orders from abroad in the coming twelve months. At the end of 2021, only 13 percent gave this assessment. Forty percent of respondents expect orders to remain unchanged. Only 27 percent expect orders to increase. At most, growth impetus is expected from the USA and India.

Many risks could intensify downturn

In addition to this rather gloomy outlook, there are a large number of risks which could significantly intensify the negative trend. Despite some easing in the supply of electricity and gas, the risk of a shortage has not yet been averted. Unplanned power plant outages could immediately exacerbate the situation. Supply interruptions or quotas for electricity and gas would have massive negative consequences for industry. The geopolitical situation is also creating uncertainties that are impacting investment behavior. In addition, high inflation in the main markets of the MEM sector could lead to further interest rate hikes, which could further cool the economy. Furthermore, there is upward pressure on the Swiss franc against the euro and the US dollar, which could worsen the international competitiveness of Swiss industry. And last but not least, it cannot be ruled out that a highly contagious Covid 19 variant could paralyze individual markets again. "There are currently hardly any indicators pointing to a positive development. We have to prepare for a difficult phase. We hope that politicians will recognize the signs of the times and secure us good framework conditions. This includes keeping our word on the abolition of industrial tariffs by 2024, which will relieve the burden on the economy and consumers by a total of CHF 500 million. We also need a rapid unblocking of our relationship with Europe," demands Stefan Brupbacher.

Source: Swissmem