In February, German factory orders again surprised on the downside of expectations. On a monthly basis, factory orders dropped by 3.5% M/M, while a decline of 2.1% M/M was expected. The January outcome was upwardly revised from -8.0% M/M to -6.7 M/M. On a yearly basis, factory orders are down an awful 38.2% Y/Y. Especially consumer goods (-8.7% M/M) and intermediate goods (-6.5% M/M) dropped sharply, while capital goods (-0.5% M/M) showed a more modest decline. This outcome raises fears that German GDP will show another sharp contraction in the first quarter of 2009.