Factory orders dropped 1.4 percent in July from a month ago, which was the biggest fall since January when they slid 2.6 percent, data from Destatis revealed Friday.

Economists had forecast orders to fall 0.6 percent. Orders had increased 1.8 percent in June and decreased 0.3 percent in May.

In July, domestic orders increased 4.1 percent from the prior month. On the other hand, foreign orders fell 5.2 percent due to a 9.5 percent decrease in demand from countries outside euro area. New orders from the euro area gained 2.2 percent.

The economy ministry said domestic demand continued to remain positive. Data suggests a further slight upward activity in the manufacturing sector.

A drop in orders from outside the euro zone could suggest that the problems in the emerging markets are increasingly affecting German businesses, economists at Commerzbank said.

This supports rather cautious outlook for the coming quarters, due to which Commerzbank lowered the 2016 growth forecast to 1.5 percent from 1.8 percent.