Orders fell by 0.9 percent in May from the previous month in Europe's biggest economy, according to provisional and seasonally corrected figures released by the economy ministry. Analysts polled by Dow Jones Newswires had expected the leading indicator to gain 0.8 percent.
The decline was nonetheless an improvement from April, when industrial orders fell by 1.8 percent on a monthly basis. But for Natixis analyst Costa Brunner, the latest decline "is definitely an alarming sign for the German industry and the economy as a whole."
Postbank's Fabienne Riefer said the German industrial sector's "best days are behind it," while Matthias Rubisch at Commerzbank declared: "The boom in the manufacturing sector is over."
Germany, which is also the world's leading exporter at present, has resisted a slowdown seen in other eurozone countries and the United States but is now headed for a patch of much weaker growth. "Western Europe now follows the US into a marked downturn," Rubisch said. For Brunner, the order data underscored "an accelerating risk to the cooling down of important trading partners."
But while domestic orders fell by 2.7 percent in May, foreign demand grew by 0.8 percent, a ministry statement said. German industrial production figures are expected on Monday, and Rubish said that "no more than a stagnation of manufacturing output can be expected for the rest of the year."
On Wednesday, the German retail federation HDE cut its 2008 forecast for domestic consumption growth to 1.5 percent after first-half results came in lower than expected.
It was one of a number of increasing signs that an anticipated pickup this year in German consumption and domestic investment would not occur. Exports have still managed to hold up however, and German companies report their foreign order books are still fairly full. Even so, Rubisch forecast: "From now on only moderate GDP growth can be expected."