Falling industrial orders shade German picture of health

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Industrial orders in Germany plunged 7.4% in January 2017, countering a sharp upswing in the previous month

Industrial orders in Germany plunged 7.4 percent in January, preliminary official data showed Tuesday, troubling a largely bright picture of recovery in Europe's largest economy.

New orders -- a closely watched indicator of future economic performance -- had increased 5.2 percent in December, adjusting for price, seasonal and calendar effects, federal statistics office Destatis confirmed.

Analysts surveyed by Factset had predicted a much smaller fall in January of 2.5 percent.

"Today's disappointing data is a good reminder that German industry is having more problems returning to full speed than buoyant sentiment indicators have been suggesting," said economist Carsten Brzeski of ING Diba bank.

January's drop in new orders was the largest since 2009, he noted, following on from months of "almost unprecedented" fluctuations in the indicator since last summer.

But the government said there was no cause for alarm.

"The strong increase in orders in the final quarter of 2016 makes a weak start to the new year manageable," the federal economy ministry in Berlin commented in a statement.

Comparing December plus January to October plus November showed a fall of just 0.4 percent in orders, the civil servants pointed out.

Berlin also highlighted strong confidence surveys among industrial firms, suggesting a pick-up in business in the coming months.

"Given the very positive sentiment indicators to date, this is probably an outlier," agreed analyst Ralph Solveen of Commerzbank.

"The trend in industrial production should still point upwards in the coming months."

Both the economy ministry and Commerzbank pointed out that much of the drop was down to large contracts -- a volatile item that can see large swings from month to month.

Excluding large orders, January's data showed a smaller fall of 2.9 percent.

Heightened uncertainty has weighed on business since June 2016, when Britain voted to quit the EU, and been sustained by Donald Trump capturing the White House on a protectionist platform, as well as upcoming elections in the Netherlands, France, and Germany in which anti-globalisation parties stand to make strides.

With deep economic connections to both Britain and the United States, Germany stands to lose out if new barriers to trade spring up in the English Channel or the Atlantic.

For now, January's fall in domestic demand for German industrial firms' products was much sharper than for foreign orders, at 10.5 percent compared with 4.9 percent.

Orders from the eurozone contracted faster than those from countries outside the single currency area.

The biggest fall came for capital goods makers, who saw 9.9 percent fewer orders, while producer goods firms lost 4.0 percent and consumer goods 2.0 percent.