German manufacturing orders decreased unexpectedly in January, as demand in the Eurozone weakened amid the deepening debt crisis, indicating that the recovery in Europe's largest economy is losing momentum.
New orders received by Germany manufacturers decreased 1.9 percent in January from a month ago, after adjusting for seasonal variations and inflation, data from the Federal Ministry of Economics and Technology showed Thursday. Economists had forecast orders to increase 0.6 percent following the 1.1 percent increase in December.
Orders by the export market declined 3 percent, with demand in the euro area falling sharply by 4.1 percent, following December's 4.1 percent increase. Orders in the non-Eurozone market decreased 2.3 percent, reversing the previous month's 0.3 percent increase.
At the same time, domestic orders registered a 0.6 percent sequential decrease after recording 0.3 percent growth in the previous month.
New orders received by the intermediate goods industry dropped 0.4 percent in January. Demand for capital goods and consumer goods decreased by 2.9 percent and 2.8 percent respectively from the previous month.
On a year-over-year basis, factory orders decreased a working-day adjusted 2.5 percent, contrary to expectations for a 1.6 percent increase. The decline followed a 1.9 percent drop in December.
The latest purchasing managers' survey by Markit Economics showed that the German manufacturing sector recorded modest growth in February, recovering from the previous month's contraction, mainly due to stronger demand from Asian emerging markets.
Last month, the Bundesbank said the German economy is set to return to growth in the first quarter after the fourth quarter's contraction. The bank expects growth to gradually pick-up pace during the reminder of the year.
The bank also noted that growth might not be boosted by exports as the prevailing external conditions indicate that demand is unlikely to rise significantly in the near term.
In December, the central bank lowered Germany's growth forecast for 2013 to 0.4 percent from the 1.6 percent previously estimated. The bank said growth will pick up to 1.9 percent in 2014.
The German economy contracted a faster-than-expected 0.6 percent sequentially in the fourth quarter, following a 0.2 percent expansion in the third quarter. The decline in activity was mainly due to the comparatively weak foreign trade.
The European Central Bank left its key interest rate at a record low of 0.75 percent for the eighth consecutive month in March. The previous change in interest rates was a quarter-point reduction in July 2012.
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