Donal O’Donovan, Published: 07/10/2014

German factory output suffered the biggest monthly decline since 2009 in August as sanctions against Russia and the Eurozone slowdown hit production.

The decline in Europe’s biggest economy and most important exporter was far more than anticipated.

German industrial orders fell by 5.7pc in August.

Orders from outside the Eurozone fell almost 10pc, while orders from inside the single currency were down 5.7pc, and domestic orders dropped 2pc.

The overall decline is the biggest since the height of the global recession in 2009.

“That clearly bodes ill for the fourth quarter,” said Carsten Brzeski, senior economist at ING. “It’s not only a [Russian President Vladimir] Putin fear factor. Germany is also suffering from the weakness of its Eurozone peers.”

After a strong start to the year, the German economy shrank by 0.2pc in the second quarter and some economists have warned it could contract again in the third quarter, pushing it into recession. The bad economic news comes at a time when Germany faces pressure from partners and the European Central Bank to spend more to help boost stalling European growth. German Chancellor Angela Merkel’s government has said it has little wriggle room for stimulus given its promise to balance the federal budget next year.

A media report at the weekend said the International Monetary Fund (IMF) will this week cut its estimates for German economic growth in 2014 and 2015 to around 1.5pc for each year due to the crises in Ukraine and the Middle East.

The German Economy Ministry said manufacturers took on fewer bulk orders than average in August and added that orders in July – which were revised up to a rise of 4.9pc from a previously reported gain of 4.6pc – had been boosted by the late summer holidays.

But it said that even taking such volatility into consideration, order levels were weak overall due to the subdued Eurozone economy and uncertainty caused by crises abroad.

Factories producing capital goods had a particularly rough month, with 8.5pc fewer orders flowing in than in July, while intermediate goods manufacturers also suffered. Consumer goods orders, up by 3.7pc thanks to a surge in foreign contracts, were the only bright spot.

The weak data comes after a survey last week showed Germany’s manufacturing activity shrinking for the first time in 15 months, in September, as new orders dried up.

Orders are now 0.3pc below second-quarter levels, the Economy Ministry said.

Germany is Europe’s biggest economy, regarded as the powerhouse of the currency union but growth there now lags well behind big peers such as the UK and US, which are emerging from the great recession much quicker than countries within the Eurozone.