Does the Survey Data on New Orders Lies?

Alina Stundziene, Grazina Startiene, Rita Remeikiene, Mindaugas Dapkus

Abstract


Purpose. Many researchers agree that the business and consumer surveys are very important for the prediction of the future changes of economics. In other words they are the leading indicators of an economic activity. But doubts that survey data are suitable for such prediction also exist. The objective of this research is to test how the survey data on new orders corresponds to the real data of industrial new orders. An incentive to make such the research arises after the decision of European Commission to stop the collection of data on industrial new orders from May 2012.

Methodology. The authors of this research have set the targets to test 1) can the industrial new orders be predicted by the survey data on new orders and 2) can the survey data on new orders be the measure for prediction of the future industrial production. The data of Germany were chosen for this research because it is one of the leading economies in Europe and because of the longest series of such statistical information. Monthly survey data on new orders, real industrial new orders and industrial production from January 1995 till April 2012 were analysed. Correlation and regression analysis with lags was used for this research.

Results. The research showed that the survey data on new orders weakly represents the real data of new orders and these results are reliable as the residuals of the regression model satisfy all the needed requirements, contrary to the results of the European Commission. Moreover, the survey data on new orders is not an appropriate measure for prediction of the future industrial production. The regression model between the survey data on new orders and the real industrial new orders taking into account their lag values explains only about 50% of the variation. It means that lots of managers participate in the survey irresponsible and don’t show the real situation or the questions that they must answer are not very clear for them. That’s why the survey data on new orders cannot be used for the prediction of real industrial new orders or industrial production as they are unreliable.

The theoretical contribution. The theory say that new orders anticipate business cycle turning points and are therefore widely monitored by analysts and policy makers. There is a longstanding tradition of new orders leading industrial production. Now this can be hardly applied in the practice as there are not collected the data on industrial new orders any more. That’s why the need of new discussion and research arises: can the survey data anticipate business cycle turning points or can the survey data anticipate the real data of new orders.

Practical implications. The authors of this research think that the decision of European Commission to stop the collection of data on industrial new orders and to collect only the survey data on new orders is improper as these data are not suitable for prediction of real industrial new orders or industrial production.

Keywords: industrial new orders, survey data on new orders, industrial production, confidence of surveys, Germany.

Paper type: Research paper.

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