New orders received in the Swiss MEM industries rose by 30.6% in the first nine months of 2021 compared with the same period of 2020. Looking at the third quarter only, the year-on-year increase stood at 44.2%. This huge upturn includes a significant base effect, given the severe order losses in the pandemic year 2020. The picture is similar for sales. Between January and September 2021, turnover rose by 10.5% compared with the same period of the previous year. In the third quarter of 2021, growth amounted to 13.1%. SMEs and large companies benefited to a similar extent from this recovery.
In the MEM industries, it usually takes some time before sales start to reflect developments in new orders. The delivery bottlenecks over the past few months, as well as supply problems caused by the pandemic may explain why this delay is currently more pronounced.
The generally positive business trend also had an impact on companies' capacity utilization which, at 87.2% in the third quarter of 2021, exceeded the long-term average of 86.1%. According to the latest KOF business tendency survey, it rose to 89.8% in October 2021.
Exports rising in all product groups and in all sales regions
According to figures from the Swiss Customs Administration, goods exports by the MEM industries recorded a year-on-year increase of 14.9% in the first nine months of 2021. The total merchandise value was CHF 50.5 billion. All key sales markets followed a positive trend. Exports to the EU rose by 19.3%, those to the USA by 11.8 %, and exports to Asia by 8.9%.
Looking at the first nine months, all product groups also saw growth in sales. Metals exports rose by 24.0%, precision instruments by 12.9%, electrical and electronics by 12.0%, and mechanical engineering by 10.4%. However, problems with the delivery of semiconductors in the third quarter of 2021 impacted Swiss automotive suppliers, whose exports of parts and accessories fell by 11.1%.
Rising raw material prices and high Swiss franc rate push down margins
The vast majority of companies in the Swiss MEM industries were able to benefit from the strong recovery of the global economy in the first nine months of the year. New orders received are now well above pre-crisis levels, with sales only just below these. Companies are therefore generally positive with regard to the outlook. In the latest Swissmem survey, half (49%) are anticipating the same level of new orders from abroad in the coming twelve months, while another 36% are even expecting orders to rise further. Only 15% believe orders will fall.
Nevertheless, the recent rapid appreciation of the Swiss franc against the euro is putting pressure on the already low margins. The same applies to price rises for raw materials and energy, unless these can be passed on to customers. In addition to this, there are also continuing delivery bottlenecks in semiconductors, metals and metal products, as well as upstream products. There is thus a danger that, despite this powerful upswing, many companies will be unable to make up for the losses of the past few years.
Competitive electricity prices are necessary
The Swiss MEM industries can make the biggest global contribution through the export of their energy efficiency technologies if there is an internationally competitive environment in Switzerland. This must not be compromised with the upcoming major energy policy decisions. Swissmem sees the new grid surcharge of 0.2 centimes/kWh being proposed in a consultation bill as the first step towards self-sufficient electricity production in Switzerland in the future. This development will lead to a sharp increase in electricity prices in the medium term, and thus jeopardize the Swiss production location and its export opportunities. Rather, future energy policy to ensure supply security should aim for technological neutrality, competitive electricity prices, full liberalization of the electricity market, and the inclusion of Switzerland in the European power grid.