Monday, November 8, 2010
Today German industrial production surprised to the downside in September, falling 0.8% over the month on a seasonally-adjusted basis. The contraction brought the annual pace of growth to 7.9% over the year, down from a 10.7% clip in August.
It looks like my data mining is proving to be rather useful. The ratio of the Ifo expectations/current index, which tends to lead German IP growth by about 6 months, turned down in February 2010 - now so has the pace of annual industrial production growth. The implication is that the Q4 2010 rate of domestic activity is likely to be quite weak.
The chart illustrates the 6-month lead of the trend in Ifo expectations index minus the trend in Ifo current index and the annual growth rate of industrial production.
By my count (you'll have to trust me here), German data has surprised 9 times to the upside and 10 times to the downside this month (October through current). We'll see; but the scales are tipping to the downside.