The Raiffeisen SME PMI index fell again in April.
All six components are now below the 50-point growth threshold. The improved economic data from the euro zone certainly provide a glimmer of hope, but most SMEs are not currently expecting a rapid easing of industrial demand.
The Raiffeisen SME PMI index fell from 47.9 to 44.8 in April and is thus even further below the expansion threshold of 50 points. The share of SMEs surveyed reporting lower activity than the previous month has therefore increased. All components of the SME PMI index were in decline. Now, they are all in the contraction zone, including the orders component which slipped from 50.7 to 44.5 points.
Weak international demand remains the main concern of the SMEs surveyed. Merchandise exports were recently in decline for two successive quarters. The greatest deterioration was noted in industries that have been losing importance for some time due to structural change, such as e.g. textiles, printing or plastics. In this case, exports are already below the pre-pandemic level again.
Due to the very low level of orders, most industrial SMEs have lower than normal production capacity utilization. It has recently fallen again, as shown by e.g. the components of the PMI index relating to production volume and delivery times. These fell from 48.1 to 44.4 and have not been this low since the initial phase of the pandemic. Delivery times, which refer to the period from ordering to dispatch to customers, are therefore much shorter than usual.
Faced with low capacity utilization, SMEs are showing restraint in terms of investment and staff recruitment. The employment component of the Raiffeisen SME PMI index has been below the growth threshold of 50 for some time and fell further slightly to 45.9 points in April. However, large-scale job cuts are still not on the agenda. Instead, SMEs are increasingly relying on natural fluctuation or sometimes partial unemployment.
Improved economic data from the euro zone
In the meantime, there are increasing signs of a stabilization of the economy in the euro zone and especially in Germany. As a result, business morale has recently brightened further in the Eurozone and has not been so optimistic for about a year. The most reliable indicator of morale for the Eurozone economy, the composite Purchasing Managers’ Index (PMI) for manufacturing and the service sector rose from 50.3 to 51.4 points in April. However, this positive development is limited to the services sector, while there is no sign of a reversal of the trend in industry.
Certainly, industrial companies are benefiting from the new net reduction in charges linked to energy bills. However, the trend in orders remains disappointing and does not really encourage optimism. The European Central Bank is expected to cut rates by mid-year. However, only a few Swiss SMEs expect a clear recovery in demand from Europe in the coming months.
