In December, German manufacturing orders rose more than expected, providing a bright spot for Europe's largest economy as the pandemic threatens to push it into another recession.

Demand rose 2.8% after increasing 3.6% in the previous month, a higher reading than even the highest estimate in a survey of 27 economists. Domestic demand was a major driving force behind the development.

Fall in German manufacturing fuels fear of eurozone slowdown | Financial  Times

In the final three months of last year, German output fell 0.7% as consumers were alarmed by another wave of Covid-19 infections and factories continued to struggle with supply-chain issues. As the Omicron variant sweeps through the region, the number of cases of Coronavirus continues to rise to new highs.

According to recent business surveys, the bottlenecks that have slowed manufacturing output and driven up costs for producers are easing. An improved supply situation, if confirmed, could help fuel a significant rebound forecast to take place later this year.

Another challenge is inflation, which did not slow as much as expected in January due to rising energy prices. Manufacturing firms are progressively passing on greater costs to their customers, raising the risk of inflation remaining high for longer.