Thanks to the high level of orders still on the books from 2007, the 2008 results of Swissmem's 290 reporting members show increases in sales for both foreign (5.6%) and domestic (6.3%) business. At the same time, the MEM industries' exports increased by 2.3% to a new peak of CHF 80.1 billion, despite a sharp trend reversal from the fourth quarter of 2008 onward. Q4 2008 saw foreign sales slump by 3.8%, while sales in the domestic market fell back by 2.4%.
Sharp plunge in orders
In 2008, new orders received by Swissmem's 290 reporting members declined by 17.1% compared to the previous year's high level, with foreign orders showing a steeper fall (19.4%) than domestic orders (-7.5%). In the fourth quarter, the global economic crisis led to a marked accentuation of the decline in orders. Thus, Q4 2008 saw a 33.9% year-on-year fall in foreign orders and a 17.9% fall in domestic orders. Overall, global exports in the fourth quarter were down 7.7% on the yearback period.
Big differences between industries and markets
Over the year as a whole, the product sectors of precision instruments (6.7%), automotive (6.5%) and electronics and electrical engineering (6.0%) reported similar positive trends, while the subsectors of mechanical engineering (-0.1%) and metalworking (-1.4%) were roughly on a par with the previous year. At 5.8%, export growth was slightly higher in the case of the Asian markets than for US-bound exports (5.5%). Exports to the countries of the European Union, which account for 65.1% of the total and are therefore by far the most important market, increased slightly on an annualized basis (0.6%).
At the end of the fourth quarter of 2008, capacity utilization at the various
MEM companies stood at 88%; down 2.9% on the previous year. At the end
of September 2008, the MEM industries employed 355,690 people on a full-time
basis, which represents a year-on-year increase of 5%. In a five-year comparison, the companies of the MEM industries recorded a 15.9% increase in jobs.
Business outlook uncertain
The business outlook for the coming months is fraught with uncertainty. The sharp plunge in orders toward the end of 2008 will lead to declining earnings over the coming months and companies are generally bracing themselves for a deterioration in the market situation in all global market regions. It is still impossible to say how long a recovery will take to emerge and to what extent foreign economic stimulus programmes will have a positive impact on the earnings situation.
Swissmem welcomes the measures proposed by the Federal Council in the context of the second economic stabilization package, which are aimed at improving the operating environment for the export industry. These include the extension of short-time work from 12 to 18 months. This will give businesses additional leeway to pull through the crisis without having to lay off employees and lose valuable expertise as a result.
Swissmem also views the widening of the availability of Swiss Export Risk Insurance (SERV) positively, as it will reduce financing costs for exporters, thus making it easier for them to accept foreign orders. For our heavily export-oriented industry, this measure will create the kind of level playing field already familiar to our competitors from the main OECD countries.
A third measure welcomed by Swissmem as a positive move is the decision by the Innovation Promotion Agency (CTI) to increase its funding for industry-related research projects from CHF 88 million to CHF 110 million. Swissmem is convinced that this will increase companies’ motivation to develop new products during the crisis which can then be brought onto the market when the economy starts to pick up again.
Danger of a credit squeeze
Swissmem is observing the trend in credit terms with some degree of concern. Given that the financial crisis is certainly not over yet and looks set to deteriorate further over the coming months, a tightening of conditions on the credit markets cannot be ruled out. This would create major difficulties for our companies, as they depend on securing operating loans at reasonable terms, particularly during times such as these.
Zurich, 24 February 2009
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