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Swiss engineers see gloomy future as COVID-19 batters sector

ZURICH (Reuters) - Switzerland’s engineering sector suffered a slump in orders and exports during the second quarter of 2020, industry association Swissmem said on Wednesday, as the COVID-19 crisis battered makers of machine tools and precision instruments.

Swissmem painted a gloomy picture of the situation, adding it feared significant job losses over the next year as companies adjusted to the downturn.

“The short-term outlook leaves little room for optimism,” the industry body said in a statement.

Worldwide lockdowns to tackle the new coronavirus pandemic have hit demand, the organisation said, with second quarter orders down 19.5% compared with the second quarter of 2019.

Sales at its member companies fell by an average of 19.7%, while exports were down by a quarter.

As a result, factory capacity utilisation fell to 77% in July, a level last seen during the financial crisis of 2009, Swissmem said.

Although Switzerland is more famous for watches and chocolate, mechanical and electrical engineering is a crucial part of the country’s economy, contributing 25% to the value of its exports.

Overall the sector employs 319,600 people, down 1% from the first quarter.

Swissmem director Stefan Brupbacher said he was very concerned and feared “significant job cuts” in the next 12 months as companies reduced costs.

“The situation in the Swiss MEM industries is gloomy and there is great uncertainty in many sales markets,” he said. “A gradual recovery is not expected for most companies until next year.”

The increased value of the Swiss franc against the dollar and the euro - driven by investors’ demand for safe haven assets during the crisis - was cited as a further difficulty and was reducing profit margins, Swissmem said.

The recent recovery in the Purchasing Managers Index (PMI) offered some encouragement, Swissmem said, although this only meant a stabilization at a low level rather than any major improvement. [nL8N2F51SI]

Reporting by John Revill; editing by Brenna Hughes Neghaiwi