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German factory orders unexpectedly plunged in February, adding to evidence that Europe’s largest economy is some way off from overcoming a painful slump in industry.

Orders were down 4.2 percent, way off economists’ expectations for a 0.3 percent gain. A drop the previous month was revised, but still showed a 2.1 percent decline on the back of weakening global investment demand.

“Manufacturing momentum will continue to be subdued in the coming months, particularly due to lacking external demand,” the Economy Ministry said.

The euro erased its gain after the report was published. It was little changed at $1.1238 as of 8:05 a.m. Frankfurt time.

The deteriorating outlook for manufacturing will come as a further warning sign to policy makers overseeing the euro-area economy, which has been mainly propped up by services activity in recent months. If prolonged weakness at factories spills over to other sectors, that could further undermine confidence and economic prospects for the region.

European Central Bank officials will meet next week to offer their latest policy assessment. At their update in March, growth forecasts for 2019 were slashed by the most since just before the start of quantitative easing, triggering fresh stimulus for banks and a pledge to keep interest rates low for longer.

--With assistance from Kristian Siedenburg, Harumi Ichikura, Catarina Saraiva and Piotr Skolimowski.

To contact the reporter on this story: Carolynn Look in Frankfurt at clook4@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Jana Randow

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