SMEs in the MEM sector are cautiously optimistic

In the winter of 2022/23, the economic slowdown has arrived in the Swiss MEM sector. High energy prices, rising interest rates, the weak foreign economic environment and high uncertainty are weighing on demand for capital goods. The exchange rate and labor shortages are also affecting the MEM sector. The SMEs surveyed in January are nevertheless cautiously confident that things will soon improve.

Fig. 1: The biggest challenges for SMEs in the MEM sector. (Graphic: Swissmechanic)

Order intake, sales and exports in the MEM sector rose only slightly in the fourth quarter of 2022. Even though the peak in energy and raw material prices has already been passed, the still high prices compared with pre-pandemic levels are reducing MEM customers' willingness to invest. The higher interest rates with which central banks are trying to tame inflation, the weak foreign trade environment and the high level of geopolitical uncertainty are also dampening demand for capital goods. The strong Swiss franc is a further headwind in the European sales market. Although production capacity utilization in the MEM sector and the order backlog secured for the medium term were still relatively high in January 2023, they are showing slight downward trends. Moreover, on balance, the SMEs surveyed expect incoming orders and sales to fall in the first quarter of 2023 compared with the same quarter of the previous year. This is shown by the latest quarterly survey conducted by Swissmechanic, the employers' association for SMEs in the MEM sector.

Swissmechanic business climate index in the green again

Although supply chains are still tighter than average in a longer-term comparison, the survey shows that the situation has improved noticeably. The shortage of labor, on the other hand, has become more important and is now the number one challenge (see Fig. 1).

Despite the slowdown in economic momentum due to various negative factors, SME-MEM businesses are cautiously optimistic in January 2023: 57 percent of SMEs consider the current business climate to be rather or very favorable, while 43 percent consider it to be rather or very unfavorable. This means that the Swissmechanic business climate index is back in the green after its dip in the last quarter (cf. fig. 2).

Fig. 2: The business climate index is back in the green. (Graphic: Swissmechanic)

BAK Economics also shares this optimism. Following the economic slowdown in the winter of 2022/23, more momentum is also expected in the MEM sector from the second quarter of 2023. Behind this is the fact that various negative factors, some of which are already showing signs of weakening, will increasingly fade into the background.

SMEs in the MEM sector show themselves fit for the future

INNOTEQ 2023 will be held in Bern from March 7 to 10. The leitmotif of the event is "Fit for Future". The focus topic "Swiss Manufacturing" is about deglobalization, local sourcing and backshoring, Switzerland as a center for manufacturing and innovation, as well as productivity and competitiveness. The special theme "INNOTEQ Talents" is dedicated to the topics of education and training, promoting young talent and the shortage of skilled workers. Swissmechanic is present with a joint stand covering 800 m2. 24 SMEs from the MEM sector will be presenting themselves there.

Source: Swissmechanic

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