Swiss Manufacturing Drops to Record Low as Global Growth Stalls

By Joshua Gallu

Dec. 1 (Bloomberg) -- A gauge of Swiss manufacturing dropped the most ever to a record low in November as companies cut back production amid stalling global growth.

The SVME purchasing managers’ index fell to 35.2 from 47 in October, Credit Suisse Group AG said today. That’s the sharpest fall and lowest level since the survey began in 1995. Economists expected the index to drop to 45.6, the median of 14 forecasts in a Bloomberg News survey showed. A reading below 50 signifies contraction.

Switzerland’s industrial sector may continue to shrink in the coming months as the world economy slides toward a recession, cutting into orders of products like auto parts and cement. Georg Fischer AG, Europe’s largest maker of iron castings for cars, may have two “tough” years ahead as the auto industry struggles with its worst slump since World War II, Chief Executive Officer Yves Serra said on Nov. 24.

“The manufacturing sector is paralyzed by the financial- market crisis,” said Claude Maurer, an economist at Credit Suisse Group in Zurich who is responsible for the survey. “Nobody knows what the financial crisis will do to the real economy, and as long as this uncertainty is in place, manufacturers won’t do anything.”

Swiss leading indicators dropped to the lowest level in more than five years last month and unemployment increased. Straumann Holding AG, the world’s second-biggest maker of dental implants, said it will reduce workers’ hours for an unspecified period to adjust production to slowing growth rates.

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Exports are declining as some of Switzerland’s main trading partners such as Germany and the U.K. face shrinking economic growth. At the same time, a 7.7 percent gain in the franc against the euro this year is making Swiss products less competitive in their biggest export market.

A measure of order backlogs posted a fourth straight month of contraction, falling to a record low 29.9, today’s report showed. Output dropped to 27.7 from 49 the previous month, the sharpest fall and lowest level since the survey began.

Switzerland’s economy probably contracted in the third quarter and may shrink next year, Swiss National Bank President Jean-Pierre Roth said on Nov. 24. The SNB has cut 175 basis points from its main rate since the beginning of October.

To contact the reporter on this story: Joshua Gallu in Zurich at jgallu@bloomberg.net