Swissmem 2023: The industrial recession has reached the tech industry

The very low Purchasing Managers' Index (PMI) figures worldwide indicate that the downturn will continue in the coming months. High interest rates in key sales markets are dampening demand for capital goods and the permanent upward pressure on the Swiss franc is putting pressure on margins. The tech industry is experiencing a cyclical downturn. In such recessionary phases, good framework conditions are even more important than usual. Companies should therefore not be burdened with any additional burdens. In the interests of jobs, restraint is also needed when it comes to wage demands.

Incoming orders in the Swiss tech industry fell by -10.5% in the third quarter of 2023 compared to the same quarter of the previous year. Over the first nine months as a whole, orders fell by -9.9% compared to the same period of the previous year. The negative business trend was also reflected in sales in the third quarter. They fell by -1.5% compared to the previous year. Overall, sales in the first nine months of 2023 stagnated at the previous year's level (-0.1%). At 87.7%, capacity utilization in companies in the third quarter of 2023 was still slightly above the long-term average (86.2%). However, it has fallen continuously since the first quarter of 2022.

Falling exports in all sales regions

Exports of goods by the Swiss tech industry fell by -2.5% year-on-year in the first nine months of 2023, reaching a value of CHF 52.7 billion. In the third quarter of 2023 alone, the decline in exports of goods amounted to -5.5% compared to the same quarter of the previous year. Among the most important product groups, exports of metals fell by -9.6%, precision instruments by -2.5% and mechanical engineering by -0.5%. Only electrical engineering/electronics recorded slight export growth of 1.5%. All important sales markets developed negatively in the first nine months. Exports to the USA fell by -4.6%, to Asia by -4.3% and to the EU by -1.8%. The only ray of hope is India. This promising sales market has been growing continuously since 2021. Exports of goods to India increased by 9.8% in the first nine months of this year.

Bleak prospects

The downturn in the Swiss tech industry is likely to continue in the coming months. This is indicated by the very low Purchasing Managers' Index (PMI) figures worldwide. Entrepreneurs from the Swissmem membership are also much more pessimistic than at the beginning of the year. According to the latest survey, 37% expect fewer orders from abroad over the next twelve months. At the beginning of the year, only 28 percent made this assessment. Of those surveyed, 43% expect orders to remain the same. Only 20 percent expect orders to increase.

The macroeconomic environment remains challenging. Germany is in recession and the key US and Chinese markets are only performing weakly. In addition, high interest rates worldwide are dampening demand for capital goods, which would be exacerbated by any further interest rate hikes. Added to this is the permanent upward pressure on the Swiss franc, which is impairing the international competitiveness of the Swiss tech industry. Another revaluation shock would be fatal. Stefan Brupbacher, Director of Swissmem, is concerned: "Incoming orders are weak and the cushion of orders is melting away. Most companies in the tech industry are facing a difficult time. Our industry is experiencing a typical cyclical downturn that will probably last longer than initially hoped. In this situation, it is important that no additional burdens are placed on companies. For example, administratively complex and ineffective measures such as the repair index soon to be discussed as part of the parliamentary initiative "Strengthening the Swiss circular economy" should be avoided. In the interests of jobs, restraint is also needed when it comes to wage demands."

Swissmem President Martin Hirzel emphasizes: "In recessionary phases, good framework conditions are even more important than usual. For the tech industry, unhindered access to sales markets is crucial. I hope that a breakthrough will soon be achieved in the negotiations on a free trade agreement with India. I also expect the progress made in the exploratory talks with the EU to be translated into successful negotiations. This is the only way to continue on the successful bilateral path with the EU."

Source: www.swissmem.ch