Sales of industrial SMEs fall 6.4% in the first quarter and job creation slowed

Small businesses are bearing the brunt of the economic crisis. Data from the Fundación Observatorio Pyme (FOP) show that in the first quarter, sales of industrial SMEs fell 6.4% compared to the same period of the previous year. For the rest of the manufacturing sector the situation is different: on average the industry grew 2.6%, according to INDEC data.

SMEs are defined as companies with between 10 and 249 employees and account for almost half of the country's production and more than half of employment.

The report shows a drop in activity of 6.4%, against the INDEC survey for the entire sector that registered 2.6% for the quarter. In the last known data, that of April, the industrial production index (IPI) rose 1.7%. Although the IPI grew 2.5% between January and April, it has been slowing down from the 6.5% rise it showed in the first month of the year.

Employment falls

The most significant fact of the report is that, after 27 months of increases, employment stagnated among industrial SMEs, although it continued to grow in the industry as a whole. In small industries the decrease was 1.8%, and in the rest of the industry there was an increase of 0.5%.

"The loss of profitability of the smallest is explained from the labor cost (salary and non-salary) that lacks differentiation by firm size, while the labor productivity gap by size is wide and growing," they point out from the FOP.

According to the report, "this behavior finds a determining factor in the structural divergence of labor productivity by size, which has been widening over the years, and which is not reflected in the labor cost gap by size."

To this is added the fall in demand, the loss of purchasing power of SME manufactures with respect to other goods in the economy and the increase in costs.

At the sectoral level of the manufacturing industry, the SMEs that experienced the best relative performance were those in metalworking (especially metal products and electrical and electronics), while companies in wood products and furniture were the ones that contracted their activity the most.

The situation of small and medium-sized enterprises improves considerably in the technology sector. The performance of software and computer services (SSI) SMEs had increases in sales of 17.2% and employment of 6%, compared to a year ago.

"Although costs (basically wages) have been growing and segment prices evolve below the Consumer Price Index, the weight of imports in the production process is lower, as well as the profile of these companies is much more exporting, which forms a different profitability equation for this segment," requires the FOP.

In the software sector, there is also a jump in the number of employed. with a year-on-year growth of the staff of 6%, although with difficulties to get the profiles with the right qualifications.

"The confidence of SME entrepreneurs in the manufacturing industry (ICEPyME-FOP), which has evolved since 2018 below real activity (PMIPyME-FOP), deteriorated again, accentuating the pessimistic profile of the prospects of this business segment", concludes the FOP.

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