German industrial orders drop unexpectedly in December

By Michael Nienaber

BERLIN (Reuters) - German industrial orders fell unexpectedly on weak foreign demand in December, data showed on Wednesday, in a further sign that companies in Europe's largest economy are struggling with a slowing world economy and trade disputes.

Contracts for 'Made in Germany' goods were down by 1.6 percent - compared with a 0.3 percent rise forecast by economists - after an upwardly revised drop of 0.2 percent in the previous month, the Federal Statistics Office said.

"The decline in orders in December indicates that the industry's phase of weakness is continuing for the time being," the Economy Ministry said.

Without the distorting effect of bulk orders, industrial orders rose by 3.5 percent on the month, the data showed.

The overall drop was driven by a 5.5 percent plunge in industrial orders from clients outside the euro zone while domestic orders edged down by 0.6 percent.

On the quarter, industrial orders were up 0.3 percent in the fourth quarter, the ministry said, pointing to a strong rebound in orders in the automobile sector which had struggled to adjust to new emissions regulation in the third quarter.

Still, growth is expected to remain weak at the beginning of the year as sentiment indicators also point to a subdued industrial activity in the coming months.

The Ifo indicator showed last week that German business morale fell for the fifth consecutive month in January, suggesting a downturn in Europe's largest economy.

Other data released last week showed German retail sales fell by fastest rate in 11 years on the month, sending a worrying signal about household spending which has become a key growth driver in Germany.

Record-high employment, rising real wages and low borrowing costs are supporting a domestically driven upswing in Germany, which is facing increasing headwinds from a slowing world economy, tariff disputes and Britain's departure from the EU.

Global trade tensions and concern about Brexit have also prompted the government to slash its growth forecast for this year to 1 percent from 1.8 percent previously as a decade-long boom in Europe's economic powerhouse is losing steam.

($1 = 0.8785 euros)

(Reporting by Michael Nienaber; editing by Thomas Seythal and Andrew Heavens)