Industrial new orders EU October 2009 and funny estimates

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Michael Höhne
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Industrial new orders EU October 2009 and funny estimates


In October 2009 compared with September 2009, the euro area (EA16) industrial new orders index fell by 2.2%. In September3 the index rose by 1.7%. In the EU27 new orders declined by 1.6% in October 2009, after an increase of 1.4% in September. Excluding ships, railway & aerospace equipment, for which changes tend to be more volatile, industrial new orders fell by 0.4% in the euro area and by 0.8% in the EU27.

In October 2009 compared with October 2008, industrial new orders decreased by 14.5% in the euro area and by 14.1% in the EU27. Total industry excluding ships, railway & aerospace equipment4 dropped by 14.4% and 14.1% respectively.

Based on these numbers a German article was published today at, which of course included the usual comparisons between the published numbers and what economists had expected. And there comes the fun part: these “economists” (aka analysts, experts, etc.) expected a 1.0% decline from September 2009 and an 11.0% decline from October 2008.

I’m not wondering about the difference between expectations and reality; the latter will be adjusted anyway. What made me think is how the gap of 1.2% in the monthly numbers and the 3.5% in the yearly numbers fit together.

Without knowing the absolute numbers that are used to calculate the percentage values, it is easy to grasp that the expectations are somewhat weird. Assume that September 2009 has an index of 100. As we had a decline of 2.2% in October, the October index is 97.8. We also know that this 97.8 is a 14.5% decline from October 2008, and therefore the index in October 2008 was 114.375.

To be fair, the estimates of the economists were based on a different September 2009 value, because the reported 1.7% increase compared to August 2009 was 1.5% before. So the economists didn’t use 100 for September 2009 but 99.80. It’s only a small correction, but I’m adding it anyway to be as precise as possible.

So economists had a base value of 99.80 for September 2009 and 114.375 for October 2008. They expected a 1.0% decline on a monthly base (September 2009 to October 2009) and an 11.0% decline on a yearly base (October 2008 to October 2009).

99.80 – 1.0% = 98.80

114.375 – 11.0% = 101.79

Either there are two groups of economists, one for doing the monthly estimates and another for the yearly ones, or these numbers are totally fudged. If a prediction is made that new orders will decline by 1.0% from September to October 2009, then it means a 13.6% decline compared to October 2008 and not 11.0%. On the other hand, if you expect an 11.0% decline from a year ago, then you’d expect a 2% increase on a monthly base and not a 1.0% decline.

This is simple mathematics and I’m really shocked about just how flawed these numbers are. Even more annoying is the fact that the people posting such news either are dumb or think that we are.

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