Germany’s industrial orders fell sharply in January, dropping 11.1% month-on-month after a robust December, signaling a weaker start to the year for manufacturing and production.

Industrial production also declined, down 0.5% in January, underscoring weaker-than-expected activity across the sector.

Large orders from December are cited as a major factor in January’s weakness, suggesting a more moderate underlying trend as those outsized orders normalize.

Contributing factors to the weak start include a pause in large orders, volatile energy costs with oil around $100 per barrel, and geopolitical tensions weighing on global demand.

Detailed production declines were led by metal products, pharmaceuticals, and data processing/electronic/optical goods, offsetting some weakness in the broader picture.

Analysts expected a 4.5% drop in orders, making January’s decline larger than forecasts and highlighting a shock to the demand base; excluding large orders, the hit was about 0.4%.},{

The drop is partly explained by a large, December-driven wave of orders that are now normalizing, though certain sectors still showed resilience.

Excluding large orders, total factory orders were 0.4% lower than December, pointing to volatility driven by outsized December orders rather than a broad slump.

Higher energy prices and Middle East geopolitical tensions are flagged as risks to the recovery, potentially weighing on demand and production in the near term.

Domestic demand collapsed in January, while foreign demand fell, contributing to the overall drop in orders and signaling a broad-based slowdown.

There were offsets to the decline, with notable gains in the automotive sector and other vehicle manufacturing helping to moderate the overall downturn.