Strong December reading of new orders suggest that industry could shift into higher gear in 1Q 17
Year-end rally. German new orders surprised to the upside with the strongest December reading since December 2008. New orders surged by 5.2% MoM in December, from -3.6% in November. On the year, new orders were up by a whopping 7.6%. The December increase was driven by both strong domestic and foreign orders. The demand for capital goods increased by almost 10% MoM. Obviously, the December surge must be the result of some bulk orders. Nevertheless, the strong December figure all of sudden made a rather weak year 2016 a strong year for new orders. While in 2014, new orders on average increased by 0.4% every month, they dropped by an average 0.2% in 2015 and had only increased by a meagre 0.1% per month up to November. With today’s December data, the entire year has all of a sudden become the best year for new orders since 2010.
Needless to say that new orders data is highly volatile and the coming months will definitely bring some negative surprises. Still, against the background of Brexit and Trump, today’s data suggest that the German industry could shift into a higher gear in the first quarter of 2017.