Difficult times for the SME MEM: Swissmechanic business climate index stagnates

At the start of 2024, the Swissmechanic SME-MEM business climate index remains at a very low level, highlighting the ongoing challenges facing the sector. The MEM industries continue to struggle with the strong Swiss franc and a lack of orders, which in turn leads to a drop in sales and pressure on margins. Despite the many challenges, the MEM industries remain moderately optimistic at present. The silver lining on the horizon is still visible, but is shifting into the second half of the year.

The MEM industries continue to struggle with the strong franc and a lack of orders. (Image: www.depositphotos.com)

The downward trend in orders and sales continued in the fourth quarter of 2023, albeit at a slower pace. This is evident from the latest Swissmechanic industry survey and is reflected in the persistently low value of the Swissmechanic SME MEM business climate index. The economic situation in the MEM sector remains challenging. There is a lack of growth drivers not only in the eurozone (especially Germany). The Chinese economy is also still lagging well behind the momentum of previous years. In addition, the Swiss franc remains strong due to the fragile international environment and geopolitical uncertainties.

Swissmechanic business climate index for SME-MEM companies. (Source: BAK Economics, Swissmechanic quarterly survey / Image: www.swissmechanic.ch)

Order situation comes to a head

The order situation continues to worsen for an increasing proportion of companies, many of which are heavily export-oriented. For just over a quarter of the SMEs surveyed, the current order backlog is sufficient for a maximum of one month. In line with the weakening demand from abroad, capacity utilization is continuing to decline. Around half of the SMEs surveyed in the MEM industries also reported a decline in margins compared to the same quarter of the previous year. According to the survey, more companies expect to reduce their workforce than to increase it. The short-term outlook remains subdued; almost half of the companies surveyed expect a year-on-year decline in incoming orders in the first quarter of 2024.

Utilization of production capacities - (average of all companies in the MEM industries). (Source: BAK Economics, Swissmechanic quarterly survey / Image: www.swissmechanic.ch)

SME MEMs nevertheless remain moderately optimistic

The more robust US economy is providing some relief, although growth in 2024 will fall slightly short of the previous year. It is expected that the recovery in demand for equipment investments over the course of the year will support the sector. As the survey shows, SME-MEMs are currently moderately optimistic about the 2024 financial year. According to industry experts, there is still a silver lining on the horizon in terms of an easing of the negative factors. However, it will be delayed until the second half of the year.

Source: www.swissmechanic.ch

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