German industrial orders fell unexpectedly in August as demand from non-euro zone countries weakened, raising worries a slowdown in China will cut into exports from Europe's biggest economy.

Contracts for German goods declined by 1.8 per cent on the month, said the economy ministry. A Reuters poll had forecast a rise of 0.5 per cent.

The data enhances a picture of waning demand from abroad, especially China and other emerging markets. That suggests the strong exports that supported growth in the first half could lose momentum.

German factories got 1.2 per cent fewer bookings from abroad, driven by a 3.7 per cent slide in demand from countries outside the euro zone.

"The decline in orders from abroad paints a dim picture," said Thomas Gitzel, an economist at VP Bank. But he added that he expected the Chinese economy to stabilise, which could feed through to German industry.

He also said there was some comfort in a 2.5 per cent rise in orders from euro zone countries.

The economy ministry said a 2.6 per cent fall in domestic demand was due partly to holidays. Euro zone demand was "clearly pointing upwards", it said, while the non-euro zone "seems to be less reliable at the moment".

Recent data has been encouraging, with retail sales posting their strongest increase from January to August in more than 20 years, although private-sector growth lost some speed last month. Business morale unexpectedly rose for the third month in a row in September.

Economists have warned, however, that the exports which drove a second-quarter expansion may falter later this year should the economic slowdown in China and the Volkswagen emissions scandal reduce demand from abroad.

So far, strong demand from the US and a recovery in some euro zone countries have helped German companies to compensate for weaker sales to China and other emerging markets.

The German government has confirmed its forecast of 1.8 per cent growth in 2015 after an expansion of 1.6 per cent in 2014.

The data for July was revised down to a 2.2 percent drop from an originally reported 1.4 per cent decline. - Reuters