BERLIN, August 6, 2008 (AFP) - German industrial orders posted a surprise and strong fall in June, data showed on Wednesday, adding to evidence that activity in Europe's biggest economy has slowed sharply.

According to preliminary figures released by the economy ministry, orders fell by 2.9 percent in June from May when adjusted for price and seasonal effects.

The result was much worse than expected by economists polled by Dow Jones Newswires, who had predicted a moderate rise of about 0.5 percent.

The fall, reported a day before the European Central Bank's board meets to discuss interest rates, was the seventh monthly decrease running, something which has never been seen before, Unicredit economist Alexander Koch said.

The ministry also revised downwards the fall recorded in May to 1.4 percent from an initial estimate of 0.9 percent.

Even on the less volatile quarterly basis, new orders were down a very strong 4.1 percent in the second quarter, the strongest decrease since the second quarter of 1992, Koch said.

The figures painted a particularly gloomy picture of conditions in Germany's export sector, the main engine of growth for the country's economy.

Orders from abroad for German goods plunged by 5.1 percent in June, the ministry said, with those from other countries in the eurozone slumping by 7.7 percent.

From elsewhere they fell by 3.1 percent. Domestic orders fell by 0.6 percent.

'The fall in the readiness to place orders in the industrial sector seen in recent months is continuing,' the economics ministry said.

'Demand from abroad is slowing more sharply than domestic demand, which is also on a downwards trajectory. As a result prospects for industrial production all in all have worsened.'

Unicredit's Koch agreed: 'The support from already received orders is drying up very quickly, suggesting an end to the boom days in industrial production is close at hand.'

Despite slowing economic conditions, rampant energy and food prices and a strong euro making German exports less competitive, Europe's largest economy had surprised economists by growing a stellar 1.5 percent in the first quarter.

But economists have warned that figure was skewed by special effects and that data for the second quarter would show that the economy has returned to reality with a bump.

The picture for Germany's consumers is far from rosy, for instance, with data last week showing inflation touching a 15-year high of 3.3 percent in July on the back of higher food and energy prices.

Last Monday a survey of German consumers by the GfK institute showed consumer confidence falling to a five-year low owing to chronic price increases.

And the monthly business climate index for June from the Ifo institute two weeks ago fell to its lowest level since September 2005 -- and marked the biggest drop since the 9/11 terrorist attacks in the United States in 2001.

A report in the Sueddeutsche Zeitung on Tuesday quoted government experts as saying that in the second quarter of 2008, the German economy contracted by around 1.0 percent.

Official figures on the second quarter will be published on August 14.

Capital Economics said that if the Sueddeutsche's numbers are correct then it was 'likely that the euro zone will be the first major economy to fall into recession.'

Germany accounts for a third of eurozone output, Capital Economics' Jonathan Loynes said.