BERLIN (REUTERS) - German industrial orders posted their biggest drop in seven months in January, data showed on Friday (March 8), in a further sign that Europe's largest economy had a subdued start to 2019.

Contracts for goods 'Made in Germany' were down by 2.6 per cent, data from the Economy Ministry showed, marking their steepest fall since June 2018 and confounding forecasts for a 0.5 per cent increase.

The ministry said the January decline was related to the strong upward revision of the December figure to a rise of 0.9 per cent from a previously reported drop of 1.6 per cent.

"But the current decline in orders points to a continuing slowdown in the industrial sector at the start of the year," the ministry said.

Bookings for intermediate, capital and consumer goods all fell in January, a breakdown of data showed. Both foreign and domestic orders declined.

The data adds to a growing sense of gloom about the sector after a purchasing managers survey showed declining exports contributed to a contraction in manufacturing for a second month running in February.

But Bankhaus Lampe economist Alexander Krueger said the December revision alleviated the pain of the January result, adding: "At the moment it remains the case that the downward trend does not yet contain any potential for causing drama."

The German economy, which was traditionally propelled by exports, has switched to relying on consumption for growth and an Economy Ministry document seen by Reuters shows the government expects state spending to rise this year, providing much-needed impetus.

Record high employment, rising wages and low interest rates have been encouraging consumers to splash their cash and a GfK survey has shown morale among shoppers held steady heading into March.

Trade frictions and the risk of Britain leaving the EU this month without a deal are major risks for the German economy, which only just avoided a recession - defined as two successive quarters of contraction - at the end of last year.

The Ifo institute has said business sentiment and other indicators point to a growth rate of 0.2 per cent in the first quarter. Finance Minister Olaf Scholz has said he is confident that modest growth lies ahead.