SME MEM sector under pressure
High interest rates, weakening exports and the uncertain geopolitical situation are putting pressure on SME MEMs. Three quarters of them currently rate the business climate as unfavorable. This is according to the latest Swissmechanic business climate index. The tense order situation in particular is weighing on SMEs in the MEM industries: almost one in four companies no longer has enough orders on hand for one month.
Four times a year, Swissmechanic Switzerland, the employers' association of the MEM SMEs, surveys its member companies on their economic situation. The resulting Swissmechanic Business Climate Index is compiled in collaboration with the economic research institute BAK Economics and enables meaningful issue monitoring of the MEM sector.
Sharp decline in incoming orders causes concern among SME MEMs
The latest survey clearly shows that SME MEMs are under increasing pressure. In October 2023, the Swissmechanic business climate index suffered a significant dip twice in a row for the first time in three years and is now clearly in the red.
"Almost 75% of the SMEs surveyed currently rate the business climate as unfavorable. For the first time this year, SME MEMs cite the lack of orders as the biggest challenge. Almost one in four companies no longer has enough orders on hand for one month," explains Jürg Marti, Director of Swissmechanic. Compared to the same quarter of the previous year, 63 % of the companies surveyed reported a decline in incoming orders. In contrast, only 13 % reported an increase. In line with the weak order situation, capacity utilization is currently falling and stands at 86 %.
Geopolitical uncertainties and restrictive monetary policy weigh on the business climate
"The results can be attributed to a combination of various negative factors. However, the current uncertain geopolitical situation certainly has a major influence," Marti concludes. The MEM industries are currently experiencing an economic slowdown. There is a lack of external economic stimulus due to weak growth in key trading partners such as the eurozone, USA and China. Inflation and restrictive monetary policy are also weighing on the investment climate. The appreciation of the Swiss franc is leading to losses in the competitiveness of the MEM industries' products, which must be compensated for by sacrificing margins.
Slight easing expected for 2024
The outlook for the fourth quarter of 2023 is also gloomy. More than half of the SMEs surveyed expect a further decline in incoming orders, turnover and margins due to the current difficult economic environment. A silver lining on the horizon: A similarly subdued economic environment is expected for 2024. Nevertheless, there will be a slight easing of some negative factors. Energy and commodity prices have stabilized (at a high level) and inflationary pressure is easing somewhat both globally and in Switzerland. Many central banks can therefore be expected to ease their monetary policy and provide a corresponding boost to growth in the real economy.
Source: www.swissmechanic.ch
