German factory orders slump in January

German factory orders fell in January, according to figures released by Destatis on Friday.

Factory orders dropped 2.6% on the month, missing expectations for a 0.5% increase and compared to a 0.9% rise in December. The December data was revised up from an estimated fall of 1.6%.

Domestic orders decreased by 1.2% and foreign orders fell by 3.6% in January 2019 on the previous month.

New orders from the euro area were down 2.6%, while new orders from other countries decreased 4.2% compared to December 2018.

On the year, orders were down 3.9%, an improvement on the upwardly-revised 4.5% drop in December and better than the 5.7% fall analysts were expecting. The year-over-year rate for December was revised up 2.5 percentage points.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said this was a very poor headline but the revisions are they key story in the report.

"Factoring-in these changes, the data show that new orders mean-reverted at the start of the year following a strong finish to 2018, especially in consumer goods. The main hit to the January headline, though, came from a 3.6% fall in new orders for capital goods, reversing a recent string of gains, but new orders for intermediate and consumer goods also slipped.

"Across markets, the 3.6% plunge in export orders suggests that external demand is still a key point of weakness, especially to non-EZ economies, but domestic demand also weakened, slipping by 1.2%. New orders rose solidly quarter-on-quarter in Q4, pointing to support for production growth in Q1, though the underlying trend remains weak, indicating that manufacturing as a whole will remain a drag on the economy in the first quarter."