The industrial recession has reached the technology industry

New orders in the Swiss technology industry fell by 10.5% in the third quarter of 2023 compared to the same quarter of the previous year. When viewed over the whole first nine months, orders declined by 9.9% in comparison with the prior-year period. The negative performance was also noticeable in the third quarter in terms of sales, which fell by 1.5% year-on-year. Overall, sales stagnated in the first nine months of 2023 at the same level as the previous year (-0.1%). Capacity utilization within companies came to 87.7% in the third quarter of 2023, still slightly above the long-term average of 86.2%. However, it has fallen continuously since the first quarter of 2022.

Fall in exports to all regions

In the first nine months of 2023, goods exports by the Swiss technology industry fell by 2.5% compared with the same period of 2022 to CHF 52.7 billion. In the third quarter of 2023 alone, the reduction in goods exports compared with the same quarter of the previous year came to -5.5%. In the main product groups, metals exports fell by 9.6%, precision instruments by 2.5%, and mechanical engineering by 0.5%. Only in the electrical engineering/electronics segment was there a slight rise in exports of 1.5%. All of the main sales markets performed negatively in the first nine months of the year. Exports declined by 4.6% in the US, 4.3% in Asia, and 1.8% in the EU. The only glimmer of hope is India, as this promising sales market has been growing continually since 2021. Goods exports to India increased by 9.8% in the first nine months of the year.

Gloomy outlook

The downturn in the Swiss technology industry is likely to continue in the coming months, as indicated by the sometimes very low global Purchasing Managers’ Index (PMI) figures. The owners of Swissmem’s member companies are also considerably more pessimistic than they were at the start of the year. According to the latest survey, 37% of members are anticipating fewer new orders from abroad in the coming twelve months, whereas only 28% were of this opinion at the start of the year. Of those surveyed, 43% thought that the level of orders would remain the same, and only 20% believed that orders would fall.
The macroeconomic environment remains challenging. Germany is currently experiencing a recession, and the main US and Chinese markets are performing weakly. In addition, high global interest rates are reducing demand for capital goods, which would be accentuated by any further interest rate hikes. Furthermore, the permanent appreciation pressure on the Swiss franc is affecting the Swiss technology sector’s international competitiveness. A renewed currency shock would be fatal. Swissmem Director Stefan Brupbacher is concerned: “Order intake is weak and the order backlogs are being eroded. Most of the companies in the technology industry will have to be prepared for a difficult period. Our sector is experiencing a typical cyclical downturn that is likely to last longer than initially hoped. In this situation it is important that companies are not encumbered with any additional burdens. For example, ineffective measures that involve a great deal of administrative work, such as the repair index that will be discussed soon as part of the parliamentary initiative “Strengthening the Swiss circular economy”, should be avoided. In the interests of jobs, restraint is also necessary with regard to wage demands.”

President of Swissmem Martin Hirzel emphasizes: “In recessionary phases, good framework conditions are more important than ever. It is crucial for the technology industry to be able to access sales markets with a minimum of barriers. I hope that there will soon be a breakthrough in the negotiations regarding a free trade agreement with India. I also expect the progress made in the exploratory discussions with the EU to translate into successful negotiations, as this is the only way to continue on the successful bilateral path with the EU.”