German industry is suffering because of the weakness of the wider eurozone economy and the crisis in Ukraine.
Industrial orders fell in June at their steepest rate since September 2011.
The latest stats from the Economy Ministry in Berlin show orders fell by 3.2 percent compared to the previous month and from the eurozone they plunged by almost 10.4 percent
The ministry said “geopolitical developments and risks” – meaning Ukraine and sanctions against Russia – probably led to more cautious ordering.
However, some analysts played down any impact of the Ukraine crisis on orders so far.
Commerzbank economist Ralph Solveen said the strong decline in orders was due exclusively to a drop in notoriously volatile areas such as plane and ship orders, which he said was likely caused by a strong euro and a weaker global economy.
Italy in recession again
At the same time we learned that Italy slid into recession again between April and June.
It is the third time since 2008 that growth in the eurozone’s third largest economy has turned negative for two consecutive quarters.
Carlo Sangalli, the head of Italy’s retail association Confcommercio, said: “We’re seeing a decline in industrial production, in GDP and consumer prices, along with firms in the service sector, shops and companies closing down.”
The weakness of Italy’s economy – a 0.2 percent decline from the previous three months following a 0.1 percent fall in the first quarter – puts more pressure on Prime Minister Matteo Renzi to complete promised reforms.
All he has rolled out so far was an 80-euro-a-month tax break for 11 million low income workers.
Confcommercio said the effect of that on consumer spending had been “almost invisible”.
Renzi has announced ambitious labour and tax reforms to revive growth but progress has been slow, with his energies taken up for weeks by a draining parliamentary battle over constitutional reform.
Last month, the Bank of Italy cut its growth forecast to just 0.2 percent for 2014, in line with forecasts from other bodies including the International Monetary Fund and the Organisation for Economic Cooperation and Development.
“From a medium-term perspective, the data we got from Italy this morning is much more worrying than Russia… It could be a big problem for the European Central Bank if we don’t get a sharp rebound any time soon,” said Frederik Ducrozet, senior economist at Credit Agricole, said.
The ECB, which is due to meet on Thursday, has made unprecedented policy moves in recent months to try to keep the bloc’s fragile recovery on track.