Harder to Predict in Boom Time

During the economic boom from 2005 to 2008 Germany’s manufacturing industry saw an uncoupling of incoming orders and production that was unobserved during as well as after the recession.

This brings up the question whether the characteristics of incoming orders changed during the business cycle and, if yes, how to explain this phenomenon. The analysis shows that orders lost some of their predictive accuracy during the boom but regained it during and after the crisis. This contradictory development could be explained by variations in the order and cancellation behavior, different outsourcing activities of companies during the business cycle and, last but not least, a reshuffling within the manufacturing sector.