German industrial orders fell more sharply than expected in August, official data showed on Thursday, as soaring energy costs caused by the war in Ukraine take a toll on Europe's economic powerhouse.

New orders – which usually provide a foretaste of industrial output – plunged by 2.4 per cent on the previous month, federal statistics agency Destatis said in figures adjusted for seasonal swings. Analysts surveyed by financial data firm FactSet had predicted a smaller contraction of 0.5 per cent.

"Against the backdrop of the war and high gas prices, the industrial economy is showing clear signs of braking," the economy ministry said in a statement, calling the outlook for the rest of the year "subdued".

Against the backdrop of the war and high gas prices, the industrial economy is showing clear signs of braking- Economy ministry statement

There was some good news, however, as Destatis significantly revised its July figure for industrial orders, from a 1.1 per cent drop to a 1.9 per cent increase. The agency blamed the discrepancy on large-scale orders in the aerospace industry that were reported late.

Germany's export-oriented economy has been hammered in recent months by the fallout from Russia's war in Ukraine, which has exacerbated supply chain woes and pushed up energy prices across the continent.

The August dip in demand was led by a 3.8 per cent fall in orders from eurozone countries, while domestic orders were down 3.4 per cent.

Germany's economy is forecast to tip into recession and shrink by 0.4 per cent in 2023, the country's leading economic institutes said last week. "The expected recession will be brought about by a significant decline in domestic demand, especially from private consumption," said LBBW bank economist Jens-Oliver Niklasch.