Tech industry: bottom of the downturn in sight
Zurich (ots)
The business situation in the Swiss tech industry (mechanical and electrical engineering industries and related technology sectors) remains challenging. In the first quarter of 2024, goods exports declined by 8.5%, sales by 5.4% and new orders by 2.3% compared with the same quarter of the previous year. However, there are now more and more signs that the bottom of the downturn will be reached this year. Risks are present in the geopolitical uncertainties as well as increasing protectionism, which is affecting the dynamics of the world economy. This will have a negative impact on the Swiss tech industry, with its 80% share of exports. Improving framework conditions is therefore paramount. This includes a secure and competitive power supply: Swissmem is committed to supporting the Electricity Act, which is to be put to the vote on 9 June.
Sales in the Swiss tech industry were down 5.4% in the first quarter of 2024 compared with the same quarter of the previous year, with declines being less pronounced for SMEs than for large enterprises. Capacity utilization in firms dropped below the long-term average of 86.2% in the period under review for the first time since the third quarter of 2021, coming in at 85.5%. New orders also fell in the first quarter of 2024, declining by 2.3% versus the same quarter of the previous year. As the order situation in the previous-year period was very good, this fresh decline in orders obscures the fact that new orders from abroad have now stabilized and those from within Switzerland have actually recovered. These are positive signs.
Declining exports in almost all markets
However, the current situation remains challenging: Swiss tech industry goods exports fell by 8.5% year-on-year in the first quarter of 2024, to CHF 16.9 billion. Exports decreased in all major markets. Specifically, exports to the EU fell by 11.6%, those to the USA by 2.6%, and exports to Asia by 0.9%. The substantial reduction in exports to Germany (-12%), the tech industry's largest single market, is particularly worrying. The only rays of light come from China and India, with export growth of 7.1% and 8.1%, respectively. All of the key product groups are showing a decline in exports: metals exports fell by 9.3%, mechanical engineering by 8.4%, precision instruments by 7.6%, and electrical and electronics by 2.2%.
Hard times not over yet
The declines in sales and exports come as no surprise. They are the result of the massive drop in order intake in the second and third quarters of last year. The fact that the business situation is set to remain challenging is shown by the Purchasing Managers' Index (PMI). PMI values remain below the growth threshold in the key US and European markets. The expectations of Swissmem's member companies are correspondingly cautious: just 28% expect to see rising orders from abroad in the next 12 months. On the other hand, the share of companies expecting falling orders has decreased from 37% to 28%. The remaining 46% of companies expect order levels to remain the same. From Swissmem Director Stefan Brupbacher's perspective: "The lean period for sales and exports is not over yet. However, the positive trend in order intake confirms our hope that the bottom of the downturn is in sight. The Swiss National Bank's interest rate cut, which has at least temporarily weakened the Swiss franc against the euro and dollar, has supported this development."
Harmful trade war
However, there are multiple risks present. In general, geopolitical uncertainties continue to dampen investment demand. In particular, the latest escalation in the trade war between the USA and China has substantial damage potential. The massive increase in customs barriers introduced by the USA is having a direct impact on Swiss steel exports. It also means that the abolition of the EU steel safeguarding measures is being delayed indefinitely. Martin Hirzel, President of Swissmem, is concerned: "The indirect consequences are far-reaching, as these trade barriers are putting the brakes on global economic growth worldwide. This will have a painful impact on the Swiss tech industry, with an almost 80% share of exports. Switzerland cannot put a stop to international trade wars, but it can improve its domestic framework conditions. These include more free trade agreements and refraining from regulatory nonsense like an investment protection authority."
Swissmem supports the Electricity Act
For the tech industry companies, it is paramount that a secure electricity supply be guaranteed in the short, medium and long term, and that electricity remains available at economically viable prices. Due to increasing electrification, demand for electricity is set to soar in future. In the coming decades, this will require a massive build-up in domestic power generation. Martin Hirzel is convinced: "The Electricity Act is a first, essential step towards increasing domestic power generation from hydropower, photovoltaics and wind power. But further steps will have to follow. These include repealing the prohibition on building new nuclear power plants." Swissmem is campaigning for a YES to the Electricity Act on 9 June 2024.
Contact:
For further information please contact:
Noé Blancpain, Head of Communications and Public Affairs
Tel. +41 44 384 48 65 / mobile +41 78 748 61 63
E-mail n.blancpain@swissmem.ch
Philippe Cordonier, Head of Swissmem Romandie
Tel. +41 21 613 35 85 / mobile +41 79 644 46 77
E-mail p.cordonier@swissmem.ch