By Michael Nienaber

BERLIN (Reuters) - German industrial orders fell more than expected in November after surging in the prior month, data showed on Friday, pointing to a busy final quarter overall for factories that the Economy Ministry expects to carry over into 2017.

Contracts for 'Made in Germany' goods were down 2.5 percent on the month, the ministry said. That was the biggest drop since November 2014 and slightly weaker than the consensus forecast of a fall of 2.3 percent.

But revised figures showed orders had surged 5.0 percent in October, the biggest rise since July 2014.

That meant that over the two months, bookings rose by 3.5 percent, with industrial orders from countries outside the euro zone jumping 6.4 percent.

"These results together point to a very favorable development ...in the final quarter of the year," the ministry said in a statement. That suggested an upswing in the industrial sector that would carry into the first quarter of 2017.

Commerzbank economist Marco Wagner said the overall positive picture reflected a slight pick-up in global demand. "The euro has weakened in the past months - that clearly helps to push up demand from outside the bloc too," he said.

In November alone, domestic demand fell 2.8 percent while foreign orders decreased 2.3 percent with contracts from the euro zone down 2.7 percent.

Noting the recent volatility in the data, Bankhaus Lampe economist Alexander Krueger agreed that, overall, growth in industrial orders had gained momentum.

RISING CONSUMPTION

The German economy is widely expected to have rebounded in the fourth quarter after its quarterly growth rate halved to 0.2 percent in the third due to weaker exports.

Commerzbank's Wagner said he expected final quarter growth of 0.5 percent and a similar rate in the first quarter of this year.

For 2016 as a whole, the government expects rising private consumption and increased state spending to have propelled growth in Europe's largest economy to 1.8 percent, which would be the strongest in five years.

Underpinning this prediction, German retail sales rose by between 1.8 and 2.1 percent on the year in 2016 in real terms, the Federal Statistics Office said on Friday. They rose 2.5 percent in 2015

Record-high employment, increased job security, rising real wages and ultra-low borrowing costs have boosted the spending power of Germans, making consumption the main driver of growth in a traditionally export-driven economy.

(Reporting by Michael Nienaber; Editing by Paul Carrel and John Stonestreet)