German factory orders fall more than expected in December

By Michael Nienaber

BERLIN (Reuters) - Weaker domestic demand drove a bigger-than-expected drop in German industrial orders in December, data showed on Friday, in a sign that Europe's biggest economy might lose some steam at the beginning of this year.

Contracts for 'Made in Germany' goods were down 0.7 percent on the month after having increased sharply in the two previous months, the economy ministry said. That compared with a Reuters consensus forecast for a more modest decline of 0.5 percent.

Domestic demand plunged 2.5 percent while more bookings from outside the euro zone pushed up foreign orders by 0.6 percent.

From October to December, factory orders increased by 1.0 percent on the quarter, with domestic demand rising 1.1 percent and foreign demand pushing up 1.0 percent, the ministry added.

"Order activity in industry has recovered a bit in the fourth quarter," the ministry said, adding that a pickup in demand from countries outside the euro zone was signalling a gradual recovery of the world economy.

"However, industry expectations have recently deteriorated and signal a rather modest recovery of industry output."

ING Bank economist Carsten Brzeski said that data marked a "bittersweet end" to a rather disappointing year for the German industry, which he said was still standing on shaky ground.

While industry had been able to weather an emerging markets slowdown, the euro zone debt crisis and geopolitical risks, the plunge in oil prices and the recent cooling of the U.S. economy could be "simply two risks too much", he noted.

The Statistics Office is due to publish preliminary data for fourth-quarter gross domestic product on Feb 12.

Economists polled by Reuters expect the German economy to have grown by 0.3 percent on the quarter which would be the same rate of expansion as in the third quarter.

In the whole of 2015, strong private consumption and higher state spending drove an economic expansion of 1.7 percent, preliminary data from the Statistics Office showed last month.

The spike in domestic demand has so far helped the traditionally export-oriented economy better weather a slowdown in emerging markets such as China and Brazil.

(Reporting by Michael Nienaber; Editing by Tom Heneghan)

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