Home News MEM industries: corner may have been turned
Contact Person  Ivo Zimmermann Ivo Zimmermann
Head of Unit
+41 44 384 48 50 +41 44 384 48 50 i.zimmermannnoSpam@swissmem.ch

MEM industries: corner may have been turned

Swissmem calls for swift ratification of the Croatia protocol.

After a bleak year in 2015, a slight increase in new orders during the first quarter of 2016 (+0.9%) indicates that the Swiss mechanical and electrical engineering industries (MEM industries) may have turned the corner. Nevertheless, a simultaneous fall in sales of 8.8 percent strongly indicates that the situation facing the MEM industries remains difficult. Companies are still exposed to heavy pressure on margins, and the effects of the overvalued Swiss franc on employment are becoming increasingly visible. Some 10,800 jobs have been lost in the MEM industries since the euro peg was scrapped. Swift ratification of the Croatia protocol is extremely important for Switzerland's long-term positive development as a location for industry and research. This is the only way to regain full association with the EU's "Horizon 2020" research programme.

After five quarters of continuous decline, the number of new orders received by the MEM industries rose slightly, growing by 0.9 percent year-on-year during the first quarter of 2016. This increase is due entirely to an upturn in demand from abroad. As was expected, however, sales by the MEM industries continued to decline due to the weak intake of new orders last year. Compared to the same period last year, sales in the first quarter of 2016 fell by 8.8 percent. This brought the index of sales down to its lowest level in a decade. Although capacity utilization in the MEM industries shrank to 86.5 percent, it still remained above the long-term average of 86.3 percent. When the Swiss Institute for Business Cycle Research (KOF) carried out its most recent survey in April 2016, capacity utilization had increased slightly again to 87.1 percent.    Increase in exports to the EUExports declined more slowly than in 2015. According to figures from the Swiss Customs Administration, exports in the first quarter of 2016 fell by 1.7 percent year-on-year (decline in exports for full-year 2015: 4.6%) and achieved a merchandise value of CHF 15.6 billion. Goods exports presented an uneven picture that depended on the product category. Exports in the mechanical engineering, metal and electrical engineering/electronics categories fell by 1.7 percent, 1.2 percent and 2.9 percent respectively. By contrast, exports of precision instruments increased by 0.9 percent. Geographically, the US market remains the most dynamic from a growth perspective (+2.7%). The slight increase in exports to the EU (+1.0%) is striking. This may be due to the moderate economic recovery in Europe and the weakening of the Swiss franc against the euro. On the other hand, goods exports to Asia fell substantially (-7.4%). Trend reversal in second half?The business figures for the MEM industries show that the effects of the overvaluation of the Swiss franc have not yet worn off. Companies are still exposed to heavy pressure on margins, and the effects of the overvalued Swiss franc on employment are still becoming increasingly clear. The MEM industries employed 319,400 people in the first quarter of 2016. According to the FSO, some 10,800 jobs have been lost since the euro peg was scrapped.  Nevertheless, the positive trend in new orders is increasing hopes that the corner has been turned. This may well prove to be the case provided that the Swiss franc does not appreciate again and that demand in the key markets – especially Europe – develops positively. The companies in the MEM industries continue to have cautious expectations in the face of considerable uncertainties (including the possible effects of a BREXIT and implementation of the mass immigration initiative). According to the most recent survey, 36 percent of companies are anticipating a rise in new orders from abroad over the next 12 months. Only 17 percent expect orders to decline. Companies are pinning their hopes on growth stimuli from North America, India and parts of the EU.  Swift ratification of the Croatia protocol essentialRegrettably, politicians are still failing to stem the downwards trend in framework conditions. Although the Foreign Affairs Committee of the Council of States (FAC-S) gave the go-ahead to extend the free movement of persons to Croatia on 25 May 2016, it made ratification of the Croatia protocol contingent on an agreement with the EU on controlling immigration. Swissmem feels it is unlikely that any such agreement – which would enable the mass immigration initiative to be legally implemented by 9 February 2017 – will be reached in the next few weeks and months. However, if Switzerland does not ratify the Croatia protocol by 9 February 2017, it will lose even the partial association with the EU's "Horizon 2020" research programme that it has held since spring 2014 and be relegated to the status of a third-party state in research cooperation. The consequences for Switzerland as a research location and for Swiss industry, which is reliant on innovation for its success, would be catastrophic. Swissmem is therefore calling on the Council of States to ignore the recommendation of the FAC-S and unconditionally ratify the Croatia protocol during the summer session. This would also ensure that any referendum against ratification could still be presented to voters in good time. AttachementsMedia Release (PDF)Press diagramFor further information please contactIvo Zimmermann, Head of CommunicationsTel. +41 44 384 48 50 / Mobile +41 79 580 04 84E-mail i.zimmermannnoSpam@swissmem.ch Philippe Cordonier, Communications Manager, French-speaking SwitzerlandTel. +41 21 613 35 85 / Mobile +41 79 644 46 77E-mail p.cordoniernoSpam@swissmem.ch