Toll Index October 2015 – refugee effect?

I am being asked (Simon Ward, NS Partners) whether I think the Toll Index for October may be capturing supply activity due to the influx of refugees in Germany and hence overestimating production.

Obviously this is a very reasonable question and it is indeed very likely that there is an interaction. However to the extend to which we continue to have a relatively tight Just-in-Time delivery schedule there is no reason to believe that any boosting of transportation due to the refugee inflow disengages to Toll Index from production. If we are indeed flushing out the product buffers then we may have a temporary disengagement which will close next month: since the buffers have to fill up again whatever we overestimated now must be produced next month. Furthermore the outbound Toll Index is only likely to be related to the refugee influx only to the extend to which they are related to necessary imports which Germany cannot provide them with. Considering Germany’s trade balance makes this less likely I would guess. Certainly worth keeping an eye on though.

A second question is whether falling fuel prices may shift transportation mode market share and hence influence the Toll Index. Given that energy prices affect also consumption and production but that, say, rail freight also benefits from falling fuel prices this one is a bit more complex. We need to wait and see where the Industrial Production revisions will settle down before we can have solid empirical evidence for this.

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