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Germany's factory orders unexpectedly decreased for a second straight month in December and at a faster pace, on the back of weak demand from abroad, suggesting that the slowdown in the manufacturing continued and the sector likely had a sluggish start to this year.

Manufacturing orders decreased a calendar and seasonally adjusted 1.6 percent from the previous month, preliminary data from the Federal Statistical Office showed on Wednesday, while they were forecast to rise 0.3 percent.

The latest fall was the most since June, when orders shrunk 3.6 percent.

"The decline in orders in December indicates that the drought in the industry is continuing for the time being," the economy ministry said.

"The latest sentiment indicators also point to a subdued industrial economy at the beginning of the year."

The monthly decline for November was revised to 0.2 percent from 1 percent reported initially.

Domestic orders decreased 0.6 percent and foreign orders fell 2.3 percent in December on the previous month. Demand from the euro area grew 3.2 percent, while that from other countries declined 5.5 percent.

Orders for intermediate goods fell 1.2 percent and those for capital goods decreased 2.5 percent. In contrast, demand for capital goods grew 4.2 percent, largely driven by foreign demand.

Excluding major bookings, factory orders climbed a 3.5 percent from the previous month, signaling that the current situation was not so depressing.

Compared to the same month a year ago, factory orders decreased a working-day adjusted 7 percent in December following a 3.4 percent slump in November, which was revised from 4.3 percent. Economists had expected a 6.7 percent decline.

In the fourth quarter of 2018, factory orders grew 0.3 percent, the economy ministry said. Capital goods orders grew 2.8 percent, as the automobile industry started making progress in tackling the WLTP problem.

The automobile industry logged a 10.2 percent increase in demand in the fourth quarter, while mechanical engineering and the chemical industry registered declines of 0.4 percent and 1.9 percent, respectively.

"The inventory build-up in recent months, as well as the recent drops in order books, suggest that any rebound of industrial activity in Germany will be slow and sluggish," ING economist Carsten Brzeski said.

"Looking ahead, we still expect the bottleneck in the German automotive industry to be resolved in the coming months," he added.

Germany likely avoided a technical recession in the fourth quarter, the economy ministry has said. Average annual growth slowed to a five-year low of 1.5 percent in 2018.

The latest purchasing managers' survey from IHS Markit showed that the manufacturing sector shrunk in January, marking the weakest level in 50 months.

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