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Written with AI assistance•January 5, 2026•
AI
Generated IllustrationActivity among Switzerland's small and medium-sized industrial companies declined in December, with the Purchasing Managers' Index (PMI) falling below the growth threshold. The downturn is primarily attributed to weakening demand and has impacted production and employment outlooks.
"This first bout of gloom since August is primarily due to sluggish demand."
"A slight majority of exporting SMEs are expecting the situation to remain unchanged."
Switzerland's industrial heartbeat skipped a beat in December as the SME Purchasing Managers' Index (PMI) plunged into contraction territory. The index fell by a critical 0.9 points to land at 49.4, shattering the psychological 50-point growth barrier. This marks the first time since August that the sector has slipped into the red, signaling an abrupt end to the tentative recovery observed in late autumn.
The data, released by Raiffeisen regarding small and medium-sized enterprises, paints a sobering picture of the Swiss manufacturing landscape. We are no longer looking at a slowdown; we are looking at a contraction. The 50-point threshold is the definitive line in the sand between expansion and recession, and Swiss SMEs have just crossed it. This downturn is not a statistical anomaly but a direct reflection of the cooling global economic climate that Switzerland's export-reliant machinery cannot escape. As we move into 2026, the industrial engine that powers much of the Swiss economy is sputtering, forcing business leaders to recalibrate their strategies immediately.
Driving this downward spiral is a staggering drop in demand, with the orders component of the index plummeting by two full points to 49.6. This is the root of the crisis: factories cannot run without orders, and the order books are thinning at an alarming rate. Raiffeisen's analysis confirms that "sluggish demand" is the primary culprit, dragging the entire industrial index down with it.
When the order backlog shrinks, the ripple effects are immediate and severe. A drop of 2.0 points in a single month indicates a sudden brake on procurement, likely driven by hesitant partners in the Eurozone and beyond. Swiss SMEs, renowned for their agility, are now grappling with a market that is simply not buying at the necessary volume. This isn't just a soft patch; it is a demand shock that threatens to leave production lines idle. The 49.6 figure is a stark warning: unless new contracts are signed rapidly, the industrial sector faces a difficult winter of inventory management and cost-cutting.
The renewed gloom has claimed its next victim: the Swiss workforce. In a dramatic reversal of fortune, the employment outlook index crashed from a healthy 51.1 points in November to a concerning 49.5 points in December. This shift is critical. It signifies that SMEs are no longer looking to hire; they are bracing for impact.
Falling below the 50-point mark for employment suggests that companies are freezing recruitment or, worse, considering reductions to align with the lower production volumes. Speaking of production, projections for output also dipped into negative territory, sliding from 50.4 to 49.9 points. The correlation is undeniable: with fewer orders and lower production targets, the demand for labor is evaporating. For a country that prides itself on high industrial employment and stability, this sudden pivot to a pessimistic labor outlook is a red flag that policymakers and unions must watch closely in the coming weeks.
Amidst the general downturn, a solitary beacon of resilience has emerged in the West. Exports to the United States have staged a partial rebound, fueled almost exclusively by the high-flying aerospace industry. This sector continues to defy gravity, demanding high-precision Swiss components that remain essential regardless of broader economic headwinds.
However, one success story cannot mask the broader reality. Notwithstanding this specific uplift, total Swiss shipments abroad for the final quarter of the year remained stubbornly below the levels seen a year earlier. The reliance on a single performing sector—aerospace—highlights the fragility of the current export market. While the US connection provides a lifeline, the broader export engine is misfiring. Swiss quality remains undisputed, but in a cost-conscious global market, even the best engineering is struggling to find buyers at previous volumes. The disparity between the thriving aerospace niche and the struggling general industrial base creates a 'two-speed' economy that leaves many traditional manufacturers behind.
As we stare down the barrel of 2026, the sentiment among Swiss industrial leaders is one of cautious resignation. The outlook for the new year mirrors the stagnation of the previous one. According to the survey, a slight majority of exporting SMEs expect the situation to remain unchanged—neither booming nor busting, but trapped in a low-growth limbo.
This lack of optimism is perhaps the most telling statistic of all. While a minority of firms cling to hope, the prevailing mood is that the current headwinds are here to stay. For Swiss industry, 'unchanged' is not a victory; it is a challenge to innovation and efficiency. Companies are now hunkering down, prioritizing stability over expansion. The message for 2026 is clear: do not expect a miraculous recovery. Instead, prepare for a year of grinding it out, where survival will depend on lean operations and the ability to seize niche opportunities like those in the aerospace sector.