According to the Federal Bureau of Statistics, contracts for "manufactured goods in Germany" fell by 1.6%, while economists predicted an increase of 0.3%, up 0.2% last month.
"Declining orders in December indicate that the industry's sluggish phase is continuing for the time being," the Ministry of Economy said.
Customer orders outside the euro area fell 5.5%, while domestic orders fell slightly by 0.6%.
VDMA, an industry association, said Wednesday that engineering orders in December actually fell by 8% compared with last year.
"It's clear now that the best period of German industry is over," said Alexander Krueger, an economist at Bankhaus Lampe.
"Given the global economic slowdown and many political risks, it is doubtful where new and sustainable growth drivers should come from in the near future," Kruger added.
The data show that the monthly rate of new business increases by 3.5% without the distorting effect of batch orders.
The ministry said overall industrial orders grew by 0.3% in the fourth quarter. It points to a rebound in orders in the automotive industry, which has been struggling to adapt to new emissions regulations in the third quarter.
Slow and lazy
Growth is expected to remain weak early this year as sentiment indicators show weak industrial activity in the coming months.
Carsten Brzeski of ING said, "Another sharp drop in industrial orders indicates that any rebound in industrial activity will be slow and slow."
Ifo indicators showed that German business morale fell for the fifth consecutive month in January last week, indicating a downturn in the economy.
Other data released last week showed that retail sales in Germany fell at the fastest rate in 11 years in December, sending a worrying signal that household spending has become the main driver of growth in Germany.
Record employment rates, rising real wages and low borrowing costs are supporting Germany's domestic economy, which is facing a slowdown in the world economy, tariff disputes and adverse factors for Britain's exit from the EU.
Global trade tensions and concerns about Britain's withdrawal also prompted the government to cut its growth forecast for this year to 1% from its previous 1.8%, as the decade-long prosperity of the European economic powers is losing momentum.
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