By Michael Nienaber
BERLIN (Reuters) - Weaker foreign demand drove a bigger than expected drop in German industrial orders in January, data showed on Thursday, suggesting that busy factories in Europe's largest economy could shift into a lower gear in the coming months.
Extended factory closures after Christmas and New Year holidays also played a part, with commentators cautioning against reading too much into one month's data.
Contracts for 'Made in Germany' goods fell by 3.9 percent on the month in January after surging by a downwardly revised 3.0 percent in the previous month, data from the Federal Statistics Office showed.
The reading was the weakest since January 2017 and undershot a Reuters poll of analysts who had predicted a 1.6 percent drop.
"German new orders had a horrible start to the new year," ING economist Carsten Brzeski said, adding that the drop did not come as a surprise since most German factories were closed the entire first week of January because of extended holidays.
Brzeski said the economic fundamentals remained good and order books were still filled. "German industry does not look at risk of faltering any time soon," he added.
The economy ministry said the overall trend in industrial orders was still pointing upwards despite the drop in January, adding that bookings were up 0.9 percent in December and January compared to the previous two months.
Industrial orders rose 8.2 percent on the year in January, the ministry said, adding that sentiment surveys are suggesting the global recovery will continue. "So German industry is likely to continue its positive development," it said.
Foreign demand fell by 4.6 percent on the month in January, driven by a decline in orders of nearly 6 percent from other euro zone countries, a breakdown of the data showed.
Orders for capital goods dropped 5 percent, demand for intermediate goods fell 3.3 percent while manufacturers of consumer goods registered a rise in orders of 2.4 percent.