Factory Orders Take Unexpected Drop in Germany

The German Economy Ministry reported this morning that the new factory orders index fell by -2.7% in January, following a rise of 1.6% in December. Observers had been expecting a rise of 0.6% in January, and to say the drop was a surprise is putting it mildly. Fully adjusted, the decline totals -4.9% from January of 2011.

Germany, which has prospered on both its exports and its strong internal demand, posted a -8.6% decline in orders from outside the eurozone and a -0.4% drop in new orders from its eurozone partners. Domestic orders rose 1% in January.

Germany’s DAX index, which has risen about 13% this year, immediately fell -0.3% on the report.

The country’s economy depends on exports, both to the rest of the eurozone and to the rest of the world. Its domestic economy has been sound, but though large, it is not large enough to support continuing declines in exports.

This could just be a blip, or it could by symptomatic of a larger-than-expected decline in eurozone economic growth this year.