Germany's factory orders dropped 11.1% in January 2026, triggering a sharp industrial contraction.

Germany's industrial sector contracted sharply in January 2026, with factory orders plunging 11.1% month-on-month—far worse than the 4.5% decline expected—reversing four months of growth. Industrial production fell 0.5%, defying forecasts of a 1.0% rise, driven by a 12.4% drop in metal products and declines in pharmaceuticals and electronics. Excluding large orders, the drop was only 0.4%, suggesting volatility in big-ticket contracts. Year-on-year, production was down 1.2%, and order growth slowed to 3.7%. Despite the downturn, manufacturing turnover rose 1.5%, and economists remain cautiously optimistic, citing government investments and resilience in some sectors, though risks from geopolitical tensions and rising oil prices persist.