German factory orders decline

German factory orders unexpectedly declined in January as foreign demand for investment goods such as machinery slumped.

Orders, adjusted for seasonal swings and inflation, fell 2.7% from December, when they gained 1.6%, the Economy Ministry in Berlin said.

Economists forecast a 0.6% rise, according to the median of 37 estimates in a Bloomberg News survey. From a year ago, orders dropped 4.9% when adjusted for work days.

“It’s an ugly number but it was caused by a sharp drop in big-ticket items so it masks the overall robustness of the German economy,” said Alexander Koch, an economist at UniCredit Group in Munich.

“The confidence indicators signal a gradual recovery,” he said.

The economy, Europe’s largest, contracted in the fourth quarter of 2011 as the sovereign debt crisis curbed demand for its exports across the euro region. Still, business consumer and investor confidence rose last month after Greece clinched a second bailout and the ECB flooded the banking system with a record amount of cash, pushing down yields on government debt and lifting stocks.

The euro pared gains after yesterday’s report and the yield on German 10-year bunds rose one basis point to 1.79%.

European stocks gained, rebounding from the biggest drop since November, as investors awaited a private report that may show American payrolls increased. Orders from outside the 17-nation euro region plunged 8.6% in January after surging 12.1% in December, the report showed.

Euro-area orders slipped 0.4% after a 6.5% decline in December. Domestic orders increased 0.9% in January.