(March 7): German factory orders fell in January by the most in a year, a poor start to a quarter when Europe’s largest economy may have struggled to achieve any growth at all.

Demand decreased 7% from the previous month, a far bigger drop than any economist predicted in a Bloomberg survey. A significant decline in orders for machines and vehicles such as ships and planes drove the weakness. Without large-scale orders, it slipped by 2.7%, the statistics office said. 

Germany industry has been in a rut since mid-2022. That’s partly because of Russia’s invasion of Ukraine and the ensuing energy crisis, though weak demand from China has also contributed. US President Donald Trump’s tariff threats are heaping further gloom on businesses.

All that might yet be overshadowed by a massive defence and infrastructure package promised earlier this week by German Chancellor-in-waiting Friedrich Merz, who is working to form a coalition after winning the Feb 23 election. 

The huge outlays pledged could help revive the country’s ailing manufacturers, with Bloomberg Economics saying the infrastructure component of the plan — €500 billion (RM2.39 trillion) over 10 years — could lift gross domestic product by 2% in the long run.

Still, any stimulus will take some time to feed through. Economists’ expectations for the current quarter are for just 0.1% growth.

New forecasts issued on Friday by Commerzbank AG illustrate how the shifting backdrop might impact Germany. Chief economist Joerg Kraemer cut his projection for expansion this year to zero from 0.2%, mainly anticipating a hit from US tariffs. For 2026, he raised it to 1.5% from 1%, predicting that the nation’s fiscal stimulus will lift growth.

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