SMEs start to feel crunch from demand

A man hunched over a table displaying a declining graph.

(16.11.2022) Small and medium-sized companies are struggling to improve their business situation. According to a survey of 200 manufacturing companies, the Raiffeisen SME PMI stagnated at 50.0 points in October, corresponding to the borderline between expansion (>50) and contraction (<50).

While the index had already closed on the expansion threshold at 50.0 points in September, the situation evolved slightly the following month, as evidenced by the values recorded for the various sub-components.

After dropping below the growth threshold twice in a row, order books closed the month of October at 50.0 points. The "Production" subcomponent, meanwhile, continued its downward trend, falling from 48.6 to 46.8 points. With an increase of nearly three points, from 54.7 to 57.4, the goods inventories subcomponent suggests that SMEs may not have anticipated a decline in demand.

The slump in demand has actually improved conditions for the movement of goods, both inbound and outbound. As a result, the delivery time subcomponent fell by almost three points in October (from 54.7 to 51.9), after a five-plus point drop between August and September (from 59.9 to 54.7). These figures suggest that delivery times are normalizing.

Overall, SMEs face a highly uncertain outlook in the coming months, due to weak demand from major trading partners and rising production costs. Altogether, a recession may be avoided at the national level, but the industrial sector is already being affected by a decline in activity.

According to the Raiffeisen bank, the report's author, SMEs are struggling more than large companies because of their susceptibility to energy costs and supply problems.


Last modification 16.11.2022

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