March 4 (Bloomberg) -- Manufacturing orders in Germany, Europe's largest economy, probably fell in January after increasing the most in more than a decade in December, a survey of economists showed.

Orders may have fallen 4.5 percent from December, when they gained 8.2 percent, the median of 22 forecasts in a Bloomberg survey showed. The Economy and Labor Ministry is scheduled to publish the January report at noon today in Berlin.

``It'll be a correction from the massive increase in December,'' said Steve Webster, chief European economist at 4Cast in London. ``The underlying trend is still picking up slightly.''

December's surge in orders brightened the outlook for Germany's $2.7 trillion economy, improving the prospects for an increase in investment and consumption after an unexpected economic contraction in the fourth quarter. Since then, a 29 percent increase in the price of oil has imposed additional costs on producers and consumers.

The economy shrank 0.2 percent at the end of last year as companies pared investment in equipment and exports failed to make up the shortfall. Business confidence unexpectedly fell for the first month in three in February amid concern household spending won't improve.

There are signs income tax cuts worth 6.5 billion euros ($8.4 billion) this year and the lowest interest rates since 1876, when Otto von Bismarck was chancellor, are starting to boost domestic demand. Retail sales rose the most in seven months in January and consumer confidence advanced to an 11-month high in February.

Jobless Burden

The euro's 3 percent decline from its Dec. 30 peak of $1.3666 has also helped ease concern that Germany's export-led economic expansion may stall.

Rising unemployment is still making consumers reluctant to increase spending. German unemployment rose to a postwar record of 5.22 million in February as companies such as Deutsche Bank trimmed jobs. The number of people without jobs hasn't declined since January last year.

Henkel KGaA, the maker of Persil detergent and Dial soap, said last week it sees no sign of a recovery in German consumer spending.

Stagnating consumption prompted the International Monetary Fund to lower its 2005 economic growth forecasts for Germany, the Financial Times Deutschland reported on March 2. The IMF projects Germany's economy will expand just 0.8 percent this year, compared with its previous forecast of 1.8 percent, the FTD said.

The European Central Bank yesterday kept its benchmark lending rate at a six-decade low of 2 percent, extending a freeze since June 2003. ECB President Jean-Claude Trichet said there are no signs of underlying inflation pressures in the euro region, after ``disappointing'' growth in the second half of last year.

Investors have pared expectations that the bank will raise its benchmark interest rate before the fourth quarter. The rate on the September Euribor interest-rate future contracts was 2.36 percent yesterday, down from 2.50 at the start of the year.

To contact the reporter on this story: Matthew Brockett in Frankfurt at mbrockett1@bloomberg.net.

Last Updated: March 3, 2005 19:05 EST