Home Media Corner Media Releases MEM industries: numerous risks dampen the joy arising from the current good situation
Contact Person  Jonas Lang Jonas Lang
Head of Unit
+41 44 384 48 33 +41 44 384 48 33 j.langnoSpam@swissmem.ch

MEM industries: numerous risks dampen the joy arising from the current good situation

The Swiss mechanical and electrical engineering industries (MEM industries) are in good shape. In the first quarter of 2022, new orders rose by 11.9% year-on-year, sales by 12.8%, and goods exports by 9.2%. The earnings situation, which had been difficult in the last few years, also eased somewhat. Key indicators suggest further growth. However, rising raw material and energy prices, worsening supply chain problems, increased protectionism and a potential relapse into the pandemic all make for a toxic cocktail that could cool down the economic situation significantly. In addition, there is a risk of a supply bottleneck in natural gas this winter, which would have a serious impact on the industry. The Swiss government must now do everything in its power to prevent this.

The economic recovery in the MEM industries continued in the first quarter of 2022. Sales were up 12.8% year-on-year. New orders developed at almost the same pace, with an increase of 11.9% in the first quarter compared to the previous year. The strong order books also had an impact on companies’ capacity utilization, which stood at a very high 91.9% in the first quarter of 2022 – well above the long-term average of 86.2%.  

Rising exports in all key markets

Swiss MEM industry goods exports grew 9.2% year-on-year in the first quarter of 2022, to reach CHF 17.9 billion. Growth in exports to Asia was particularly pronounced at 11.1%. There was also strong growth in exports to the EU at 9.8%, while export growth to the USA was somewhat more moderate at 5.9%. All of the key product groups were able to increase their exports. Metals exports rose by 14.9%, precision instruments by 9.4%, electrical and electronics by 7.5%, and mechanical engineering by 6.0%. 

Gratifying current situation ...

The current situation in most companies in the MEM industries looks gratifying at first glance. Only a few subsectors, such as automotive suppliers, are facing serious problems. The volume of new orders is more than one quarter higher than before the pandemic. In contrast, sales development is still lagging behind. In the first quarter of 2022, sales were only 4% above the pre-crisis level. The reasons for this are the numerous supply chain problems which have been delaying order processing since mid-2021. There is likely to be a catch-up effect here in the coming months.

The earnings situation has also improved in the MEM businesses in the past year. For 2021, 55% of companies reported an industry-standard to very good margin at the EBIT level. This is 10 percentage points higher than in 2020. The number of companies that reported a margin of less than 5% or even a loss at the EBIT level declined by 10 percentage points to 45%. 

… many risks in the outlook

Companies in the MEM industries are cautiously optimistic about the near future. With regard to new orders from abroad over the next twelve months, 35% of companies expect an increase and 47% expect the same amount. 18% are expecting a fall in new orders, meaning that this share has increased by five percentage points since the fourth quarter of 2021.

The consequences of the war in Ukraine and the lockdown in China are only reflected to a limited extent in the figures for the first quarter of 2022. Various responses from Swissmem members paint a more negative picture for April 2022. The MEM industries learned just how quickly the tide can turn during the recent Covid pandemic. Swissmem Director Stefan Brupbacher is concerned: "The procurement problems are sure to worsen with the lockdown in China and the war in Ukraine. We cannot expect this situation to ease until next year at the earliest. Together with price increases for raw materials and primary materials, increased protectionism and a potential relapse into the pandemic are creating a toxic cocktail that might reduce demand for capital goods and consumer durables in the coming months.”

In addition, the danger of a wage-price spiral is also a cause for concern. Owing to the global supply chain problems, supplier companies in Switzerland – particularly SMEs – have acquired more orders and scored points with their quality and delivery reliability. “If excessive wage increases were to trigger a wage-price spiral, this would once again squander the locational advantage of the supplier industry”, emphasizes Stefan Brupbacher. “Inflation in Switzerland is comparatively low. It is now necessary to ensure that Swiss supplier companies have the opportunity to position themselves in newly-forming supply chains.

Prevent gas rationing

Depending on how the war in Ukraine develops, Switzerland may face a shortage of natural gas this coming winter. If the supply security of gas is not 100% assured, there is a danger that many industrial companies will have to stop production. Martin Hirzel, President of Swissmem, urges: “There must be no gas rationing, as this would threaten the existence of many industrial companies. The Swiss government must now do everything in its power to avoid a supply bottleneck.” Martin Hirzel therefore considers it positive that the Swiss government has given the gas industry an urgent ordinance obliging it to secure storage capacities in neighbouring countries and options for additional gas supplies. However, this alone will not be sufficient. A national effort is required to reduce consumption. For example, a two to three-degree reduction in room temperature in public buildings, businesses and households would reduce gas consumption by 15 to 20%. “The Swiss government must implement a campaign to raise awareness among the private sector and the population in good time and motivate them to implement voluntary measures in their gas consumption", suggests Martin Hirzel. “This should be enough to avoid rationing, which would endanger industrial companies and their jobs."

For further information please contact:

Jonas Lang, Deputy Head of Communications
Tel. +41 44 384 48 33
E-mail j.langnoSpam@swissmem.ch

Philippe Cordonier, Communications Manager, French-speaking Switzerland
Tel. +41 21 613 35 85 / mobile +41 79 644 46 77
E-mail p.cordoniernoSpam@swissmem.ch


Is this article worth reading?

Last update: 23.05.2022