The downturn has now reached the industrial sector
The situation in the Swiss mechanical and electrical engineering industries (MEM industries) is currently still good. Thanks to a strong first half of the year, sales rose by 9.6% in the first nine months of 2022 compared with the same period of 2021, while exports increased by 7.0% and order intake by 2.3%. However, the third quarter of 2022 saw a significant turnaround in order intake, which fell by 12.4% versus the same quarter of the previous year. Compared to the second quarter of 2022, order intake from abroad declined by as much as 21.1%. The Purchasing Managers' Indices (PMI) in the key sales markets show a distinct downturn. So it is no surprise that the owners of Swissmem's member companies are also much less optimistic than they were at the start of the year. There are also many uncertainties and risks that could intensify the negative trend. These include the difficult electricity and gas supply situation, geopolitical tensions, further interest rate hikes and appreciation pressure on the Swiss franc.
New orders in the MEM industries fell by 12.4% in the third quarter of 2022 compared to the same quarter of the previous year. In Q3, orders from abroad saw a particularly sharp decline of 21.1% in comparison with the second quarter of 2022. Thanks to good first-half figures, new orders rose by 2.3% throughout the first nine months year-on-year.
The growth momentum is also slowing in terms of sales. In the third quarter of 2022, sales still rose by 4.6% compared to the same quarter of 2021. For the full period between January and September 2022, growth came to 9.6% compared with the same period of the previous year. This applies equally to SMEs and large companies.
Capacity utilization within companies peaked at 91.9% in the first quarter of 2022, then fell to 89.5% by the third quarter. However, this is still above the long-term average of 86.2%.
Export figures good - for now
According to figures from the Swiss Customs Administration, goods exports by the MEM industries recorded a year-on-year rise of 7.0% in the first nine months of 2022. The total merchandise value was CHF 54 billion. All key sales markets followed a positive trend. Exports to Asia rose by 13.3%, those to the USA by 7.8%, and exports to the EU by 5.6%. Exports grew in all product groups. Metals exports increased by 11.0%, electrical and electronics by 7.5%, mechanical engineering by 6.1% and precision instruments by 5.3%. However, the trend is starting to reverse in exports too. This is visible, for example, in goods exports to Germany, which receives almost a quarter of all MEM industry exports. These fell by 1.0% in the third quarter compared to the same period of 2021. In total, the growth in exports still came to 2.7% for the third quarter of 2022.
The situation in most companies in the Swiss MEM industries is currently still good. However, Swissmem's Director Stefan Brupbacher qualifies this as follows: "The downturn has definitely reached Swiss industry. This is clearly shown by the sharp drop in new orders from abroad in particular." The outlook is also becoming gloomier. The Purchasing Managers' Index (PMI) for manufacturing has been increasingly indicating a downturn in most markets for the past two months. The owners of Swissmem's member companies are also more pessimistic than they were at the start of the year. In the latest Swissmem survey, a third of them are anticipating fewer new orders from abroad in the coming twelve months, whereas only 13% were of this opinion at the end of 2021. Of those surveyed, 40% thought that the level of orders would remain the same. Only 27% are expecting orders to rise. Growth stimuli can be expected at the most from the US and India.
Alongside this rather sombre outlook, there are a number of risks that could significantly intensify the negative trend. Despite some easing in the supply of gas and electricity, the danger of shortages has not gone away, and any unplanned power plant outages could immediately exacerbate the situation. Delivery interruptions or rationing of gas and electricity would have hugely negative consequences for the industrial sector. The geopolitical situation is also causing uncertainties that are affecting investment behaviour. In addition, high inflation in the MEM industries' main markets could lead to further interest rate hikes that may slow down the economy even more. Appreciation pressure on the Swiss franc against the euro and the US dollar could also impair the Swiss manufacturing sector's international competitiveness. And not least, there is always the chance that a highly infectious COVID-19 strain could again paralyse individual markets. "There are currently very few indicators that point to positive development. We must be prepared for a difficult period. We hope that the policymakers will recognize the signs and secure good operating conditions for us. This includes being true to their word with regard to the removal of industrial tariffs from 2024, which will save consumers and the economy a total of 500 million francs. We also need to rapidly unblock our relationship with Europe", Stefan Brupbacher urges.
For further information please contact:
Ivo Zimmermann, Head of Communications
Tel. +41 44 384 48 50 / mobile +41 79 580 04 84
Philippe Cordonier, Communications Manager, French-speaking Switzerland
Tel. +41 21 613 35 85 / mobile +41 79 644 46 77