Swiss engineering industry is facing a downturn

According to Swissmem, the 12% drop in exports to Germany, the industry's most important single market, is particularly worrying. KEYSTONE / CHRISTIAN BEUTLER

The Swiss mechanical and electrical engineering industries and related technology sectors continue to face an uncomfortable situation. However, there are increasing signs that the bottom of the downturn will be reached this year.

In the first quarter of 2024, member companies’ sales and orders fell by 5.4% and 2.3% respectively compared to the same quarter of the previous year. Exports of goods fell by 8.5%, as the business association, Swissmem, reported on Wednesday.

The business situation in the industry remains challenging, according to Swissmem, although turnover at smaller companies (SMEs) fell less sharply overall than at large companies. At 85.5%, capacity utilisation was below the long-term average of 86.2% for the first time since the third quarter of 2021.

However, the association also says there are positive signs. As the order situation was very good in the same period of the previous year, the renewed decline in orders conceals the fact that incoming orders from abroad have now stabilised and have even recovered in the German market. There are also increasing signs that the downturn will bottom out this year, writes the association.

It emphasises geopolitical uncertainties and increasing protectionism as potential risks. The latter is affecting the flexibility of the global economy and therefore also that of the industry, which exports around 80% of goods. The latest escalation of the trade war between the United States and China in particular has “substantial damage potential”.

Exports fall in almost all markets

Meanwhile, exports in the first quarter declined in almost all markets, corresponding to the previously mentioned 8.5% drop. The industry still sold goods worth CHF16.9 billion ($18.5 billion) abroad in the first quarter.

In regional terms, exports to Europe fell the most by almost 12%. The decline in exports to the US (-2.6%) and Asia (-0.9%) was somewhat more moderate. According to Swissmem, the 12% drop in exports to Germany, the industry’s most important single market, is particularly worrying. The only rays of hope were exports to China and India, which grew by more than 7% and 8% respectively.

The fact that the business situation will remain challenging is reflected in the purchasing managers’ indices (PMI), whose values in the important US and European markets remain below the growth threshold. The expectations of Swissmem companies are correspondingly cautious. Only 28% of companies are expecting an increase in incoming orders from abroad over the next twelve months.

Nevertheless, the share of companies expecting falling orders has decreased from 37% to 28%.

” The lean period for sales and exports is not over yet,,” Swissmem director Stefan Brupbacher said in the press release. “However, the positive trend in order intake confirms our hope that the bottom of the downturn is in sight,” he said. The interest rate cut by the Swiss National Bank has also helped.

Adapted from German by DeepL/dkk/ac

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