German industry orders fell 2.8% in March from the previous month, the biggest drop in one and a half years.
Demand for German capital and consumer goods from the euro zone slumped due partly to worries about the Ukraine crisis, data showed today.
The surprise slide compares with the consensus forecast in a Reuters poll for a 0.3% rise.
"Overall the trend for industry orders remains upwards but it may weaken somewhat," the Economy Ministry said in a statement, adding that contracts in the first quarter were roughly stable compared to the fourth quarter of last year.
"Geopolitical events could contribute to temporary caution in order activity," said the ministry, adding that a delay in production due to a mild winter may also have an effect.
Orders for industrial goods from abroad fell by 4.6% while domestic orders were down 0.6%.
Germany's export-oriented industry struggled to gain traction last year against the backdrop of a weak global economy but picked up towards the end of 2013.
Europe's biggest economy powered through the early years of the euro zone crisis but weakened towards the end of 2012 and start of 2013.
After growth of just 0.4% last year, the government has predicted expansion of 1.8% this year, driven by domestic demand.
Industry orders from euro zone countries slumped by 9.4% with demand for capital goods from that region down 13.9% and for consumer goods down 13.3%.
Some economists were worried by the sharp drop from the single currency zone.