Home News MEM industry feeling the impact of the global economic slowdown
Contact Person  Ivo Zimmermann Ivo Zimmermann
Head of Unit
+41 44 384 48 50 +41 44 384 48 50 i.zimmermannnoSpam@swissmem.ch

MEM industry feeling the impact of the global economic slowdown

In the third quarter of 2008, the Swiss mechanical and electrical engineering industries (MEM industries) continued the marked growth phase of past years, but at a reduced pace. However, in the coming months, the outlook points towards stagnation or even a decline in growth. Whereas in terms of sales (+6.5%) and exports (+5.8%), last year’s high figures were exceeded, the economic slowdown of recent months was reflected in substantially reduced order intakes. In view of the tense economic situation, it is even more important that good operating conditions are maintained in Switzerland. For this reason, the continuation and expansion of the Swiss-EU bilateral agreement on the free movement of persons is a top priority for the MEM industries.

Despite the increasingly difficult market environment, Swissmem's 290 reporting members achieved a year-on-year sales increase of 9.1% in the first three quarters of 2008. Export sales (+ 9.0%) and domestic sales (+ 9.6%) contributed equally to growth. The companies benefited from high order backlogs that should, however, gradually reduce in coming months. The increasing sluggishness of the economy was already evident in the third quarter in the form of low growth rates in both export sales (+ 7.8%) and domestic sales (+ 1.9%).

In the first nine months of 2008, MEM companies exported goods worth CHF 60.9 bn (+5.8%), with slightly lower growth in the third quarter (+5.1%). Continued high export growth (+10.8%) was achieved this year, primarily to Asia. Deliveries to the US (+4.9%) and the EU (+4.3%) – which is by far the largest market, accounting for 65.7% of exports – also proved satisfactory. The new EU countries Romania and Bulgaria exhibited above-average growth of 10.6% and 9.1% respectively.

Marked drop in demand

In the first nine months of 2008, order intake was 12.7% lower than in the year-back period. Export orders dropped by 14.8% and domestic orders by 4.4%. This development was accentuated by the crisis on the financial markets and in the banking sector, and the related global economic slowdown, with the result that order intake in the third quarter was down 20.2% year-on-year (export: -22.9%, domestic: -9.2%).

Developments within the MEM industries have been very mixed. Certain subsectors continued to exhibit pleasing export growth this year, such as automotive (+14.3%), precision instruments (+8.0%) and electronics and electrical engineering (7.4%), while mechanical engineering (+3.6%) and metal working (+3.4%) exhibited more modest growth.

The differences were most apparent in the mechanical engineering subsector. While divisions such as pumps (+10.2%) and machine tools (+7.4%) enjoyed sustained export growth, production areas such as printing machinery (­7.2%) and textile machinery (-16.7%) were confronted with a strong international drop in demand early on.

At the end of the third quarter of 2008, capacity utilization at the various MEM companies stood at 89.9%; a drop of 2.8% compared to last year.

At the end of June 2008, the MEM industries employed 348,774 people on a full-time basis. In a five-year comparison, this corresponds to an increase of around 40,000 full-time positions.

The recessionary trend that has in recent months become increasingly evident in various economies is serving to dampen prospects and impact business further. The rapid and strong appreciation of the Swiss franc against the euro is posing an additional challenge for companies in the MEM industries.

«Yes» to free movement of persons

Current economic developments mean that companies are increasingly obliged to make systematic use of cost-cutting potential and align production with the difficult market environment. Even though production figures are much higher than in the economic crisis years following 2001, companies may still in certain cases be forced to introduce short-time work. This will allow them to react promptly and with a long-term view when faced with what may at times be abrupt market developments.

In times of economic difficulty, maintaining and building upon a good operating environment is all the more important for the companies of the MEM industries. For this reason, the continued free movement of persons and its extension to Bulgaria and Romania is of key economic importance. Swiss-EU bilateral agreements have made a large contribution towards creating numerous new jobs in the past three years, including in the MEM industries.

Due to the close economic ties between the MEM industries and European countries, it is crucial for good, contractually governed relationships to continue to thrive between Switzerland and the EU in the future. This is the only way to retain open, unhampered and non-discriminatory access to the EU single market.

Furthermore, if the Swiss economy is to remain successful on international markets in the future, rises in production costs in Switzerland must be consistently avoided. Higher production costs are nevertheless to be anticipated if the massive increases in electricity prices announced for next year are indeed implemented. The AHV initiative advocating a more flexible retirement age, which will be put to the vote on 30 November 2008, would in the long term also incur high additional costs for Swiss companies.

Zurich, 11 November 2008

For further information, please contact:

Ruedi Christen,

Head of Communications

E-mail: r.christennoSpam@swissmem.ch

Tel. +41 (0)44 384 48 50, mobile +41 (0)79 317 24 09

Jonas Lang,

Communications Manager

E-mail: j.langnoSpam@swissmem.ch

Tel. +41 (0)44 384 48 33, mobile +41 (0)79 777 41 36