German factory orders declined more-than-expected in June as both domestic and foreign demand deteriorated, raising fears that the economy shrunk in the second quarter.
Factory orders fell 1.7 percent month-on-month, data from the Federal Ministry of Economy and Technology showed Tuesday. It was worse than expected 0.8 percent drop and reversed the 0.7 percent increase in the previous month.
The decline in domestic orders deepened to 2.1 percent from 1.4 percent, while foreign orders fell 1.5 percent after rising 2.5 percent in May.
Orders for intermediate goods decreased 3.2 percent on month and that for capital goods slid 1 percent. Consumer goods orders edged down 0.1 percent.
Annually, factory orders dropped by an adjusted 7.8 percent, steeper than the 7 percent fall forecast by economists. This followed a 5.3 percent decline in May. On unadjusted terms, orders were down 5.4 percent.
Recent economic indicators namely retail sales and unemployment were negative. According to the Purchasing Managers' survey, private sector activity contracted in July due to a sharp decline in manufacturing production.
Moody's Investors Service has warned Germany that they may lose its coveted triple-A credit ratings due to intensified uncertainty regarding the outcome of the debt crisis.
However, Standard & Poor's early this month retained Germany's top notch 'AAA' credit ratings saying the economy remains resilient to withstand economic and financial shocks.
S&P expects Germany's real growth to slow approximately to 1 percent in 2012 and 2013.
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