(Adds fresh economist comment, detail)
By Paul Carrel
BERLIN, March 11 (Reuters) - German manufacturing orders slumped by 8 percent in January, posting their fifth big drop in as many months in the latest sign that Europe's largest economy will again contract sharply in the first quarter of 2009.
Preliminary Economy Ministry figures released on Wednesday
showed the second biggest decline in orders since German
reunification in 1990, dwarfing a consensus forecast in a
Reuters poll for a fall of 2.2 percent
"Industry orders are more catastrophic news," said Andreas Scheuerle, an economist at DekaBank in Frankfurt. "Production will be pretty much paralysed in the coming months."
The figures compounded the bleak picture of Germany's economic health painted by other recent economic indicators. Germany's trade surplus narrowed to its lowest level in over seven years in January as exports dived, data showed on Tuesday.
The ministry said December's orders data had been revised to show a 7.6-percent drop, versus 6.9 percent previously reported. Orders have fallen nearly every month since the end of 2007, though the slump has accelerated rapidly since last September.
As the world's largest exporter of goods, Germany enjoyed robust foreign demand for its engineering products until the economic downturn took hold last year and sent the export-orientated economy sharply into reverse.
The orders data showed an 11.4-percent decline in foreign demand, with domestic orders falling by 4.3 percent. The slump in the overall orders figure extended a run of sharp falls in the prior four months.
"Accumulated over recent months, this is the strongest drop in manufacturing orders since World War Two," said Joerg Lueschow, economist at WestLB.
Lueschow expected the economy to contract by between 1.5 and 2.5 percent in the first quarter of this year. In the final three months of 2008, it shrank by 2.1 percent, the worst quarter since reunification.
The government expects the economy to contract by 2.25 percent this year. Since World War Two, Germany's economy has never contracted by more than one percent in a single year.
Reflecting the bleak outlook, steelmaker Salzgitter
The Economy Ministry said the prospects for industrial production remained "extremely subdued."
A Reuters poll of 38 economists last week pointed to a 3.0-percent drop in January industrial output. The Economy Ministry is due to release the output data on Thursday. (Additional reporting by Brian Rohan) (Editing by Patrick Graham and Andy Bruce)