Analysts had forecast a drop of just 0.3 percent. The economy ministry for the world's third largest economy said that in December, industrial orders fell by 1.1 percent, revising an earlier provisional figure of a decline of 1.7 percent.
The ministry attributed January's sharp drop to a decrease in the number of big contracts.
“There was a backlash” after the end of 2007 when several major contracts were concluded, the ministry said in a statement. It pointed out that this affected foreign orders more than domestic orders, which “have picked up.”
Orders for capital goods fell 1.8 percent and manufacturers of consumer goods reported a 0.6 percent drop in orders.
On an annual basis the picture remains positive with industrial orders up 7.9 percent for December-January compared to the same two-month period in 2007. Germany is hoping that consumer spending will pick up to offset any potential drop in industrial exports.
Exports are the traditional driving motor of Europe's biggest economy but
there are fears demand could taper off as a result of global economic instability and a stronger euro.