BERNE, Aug 27 (Reuters) - Switzerland's engineering industry is losing some
of its steam as the global economic slowdown hits exports and high raw material
costs weigh on profits, the Swissmem industry body said on Wednesday.
The association represents the engineering, metal and electrical industry,
which accounts for some 9 percent of gross domestic product and exports some 80
percent of its production.
"We see a slowdown from a high level, the question is how fast it will be,"
Swissmem President Johann Schneider-Ammann.
However, companies overall remained "cautiously optimistic", Swissmem
director Peter Dietrich said. "We don't see a recessive tendency."
Revenue grew by some 10 percent in the second quarter from a year ago as the
sector was still benefiting from well-filled order books, Swissmem said.
But new orders dropped by nearly 14 percent. Export orders even declined
some 19 percent, though this compared to record growth in the second quarter of
2007.
A survey of Swissmem members showed companies expected orders from the
United States to shrink and saw European markets stagnating. The firms saw
continuing growth of demand in Eastern Europe and Asia.
Swiss companies like pump-maker Sulzer or engineering group ABB
have posted strong profits and sales in the first half of the year,
boosted by strong growth in emerging markets and buoyant demand from the energy
sector.
Schneider-Ammann said many companies were feeling the pinch from higher raw
material costs. "The pressure on margins has increased because higher prices for
energy or raw materials cannot be passed on so easily."
Capacity utilisation in the sector eased to 89.4 percent by the end of June
from 93.7 percent a year ago, but stayed above the long-term average of 87
percent.
WAGES
A recent string of weak economic data has raised concerns the Swiss economy
might slow sharply as the U.S.-led economic downturn is hitting Swiss export
markets in Europe hard, prompting markets to bet on lower interest rates
ahead.<0#FES>
The Swiss National Bank forecast economic growth of between 1.5 and 2.0
percent this year after 3.1 percent in 2007.
SNB Chairman Jean-Pierre Roth said in a recent newspaper interview that
signs of the slowdown would be more pronounced in the months to come.
Roth signalled that the central bank might leave its target rate for 3-month
Swiss franc LIBOR unchanged at 2.75 percent at its next meeting as record-high
inflation should ease.
But Roth also acknowledged the risk that inflation might stay high if strong
wage increases triggered another round of domestic price rises.
Schneider-Ammann also said that there was a risk of a wage-price spiral.
"But our industry has the privilege to negotiate wages on a company level," he
said. "This will lead to reasonable results." Keywords: SWISS
ECONOMY/ENGINEERING
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