Switzerland’s small and medium-sized enterprises have turned more pessimistic again, with the Raiffeisen SME Purchasing Managers’ Index falling sharply in May to signal a contraction in manufacturing activity for the first time this year, data published on Monday, 1 June 2026, shows.
This indicates a deterioration in the business climate for the manufacturing sector, the Raiffeisen report said.
The index dropped from 52.1 to 48.4 points, taking it below the 50-point threshold that separates expansion from contraction. The decline reverses what had appeared to be a modest but encouraging spring recovery, and points directly at the Iran conflict as the main disruptor of business confidence among Swiss manufacturers.
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The Iran Effect On Swiss SME Confidence
The story behind the numbers is, in large part, one of distorted timing. As tensions in the Strait of Hormuz escalated earlier this year, Swiss exporters rushed to place orders early, fearing price rises and supply disruptions. That pre-ordering propped up the March and April PMI readings, creating a false sense of recovery. Around half of export-oriented SMEs reported that these advance orders had temporarily supported their order books, but those effects have now unwound and are actively pulling the current index lower.
“The fall of the PMI below the growth threshold illustrates that the industrial recovery is not yet secure,” said Domagoj Arapovic, Senior Economist at Raiffeisen Switzerland.
Temporary pull-forward effects distorted the dynamics in previous months, while the persistently high level of uncertainty is now once again impacting business conditions, the Raiffeisen report said.
The impact is concentrated among export-facing companies. Domestic SMEs remain somewhat more resilient, but they too are reporting a meaningful slowdown in expansion. The pattern reflects Switzerland’s unusual economic structure: a domestic economy that functions relatively independently, sitting alongside an export sector (in pharmaceuticals, machinery, watches and precision instruments) that is acutely sensitive to geopolitical disruption and exchange rate movements.
Expectations Are Bleak
The forward-looking data in Raiffeisen’s special survey accompanying the May index is sobering. Only around 15% of exporting SMEs expect a sustained recovery in order volumes in the second half of 2026. More than half do not anticipate any improvement until 2027. Nearly 30% say they cannot currently give any clear assessment of where their business is heading, a level of uncertainty that is likely to weigh heavily on investment and hiring decisions in the months ahead.
The combination of geopolitical uncertainty, fading pre-order effects and weak forward expectations creates the conditions for companies to freeze headcount, cut discretionary spending and delay capital investment. Raiffeisen surveys around 200 manufacturing firms each month across all sectors, giving the index broad coverage of the SME landscape that makes up the backbone of the Swiss economy.
