LONDON Feb 7 German industrial figures over the
past few days have provided not just a big surprise, but perhaps
at first glance a confusing one.
First, industrial orders for December rose 5.4 percent month
on month, way higher than the 0.5 percent consensus expectation
and higher than any forecast in a Reuters poll.
Then, industrial production for December came in at minus
3.0 percent, way lower than the plus 0.3 percent consensus
expectation - and lower than any Reuters poll forecast.
Here's the divergence: bit.ly/2lf0Qfs
So what does it mean? Look at the correlations.
In short, economic growth in the final quarter of 2016 may
not have been as robust as some analysts expected.
Most believe it to have grown by some 0.5 percent in the
fourth quarter. But the industrial production performance may
not allow for that.
Over the last 10 years, the correlation between monthly
industrial production and current quarter GDP has been a strong
0.868, according to Thomson Reuters data.
In other words, poor industrial production usual translates
into poor GDP.
But the December orders - described as "sensational" by one
analyst - bode well for the first quarter of this year.
The 10-year correlation between monthly orders and the next
quarter has been an almost-as-strong 0.808.
So probably positive news overall for Germany's economy.
(Editing by Hugh Lawson)