(Bloomberg) -- German factory orders continued to decline in September, adding to concerns that Europe’s largest economy is slipping into recession as it struggles with surging energy costs.

Demand fell 4% from the previous month, a steeper drop than the 0.5% median estimate in a Bloomberg poll of economists and accelerating from a revised 2% decrease in August.

The worse-than-expected decline was driven by foreign orders, which slumped by 7%, the Federal Statistics Office said in a statement on Friday. Demand from the euro area was 8% lower, compared with a 6.3% decrease from other countries. Domestic orders grew slightly.

“The outlook for manufacturing activity remains gloomy in light of high energy prices, which are increasingly affecting consumers,” the German Economy Ministry said in a statement. “After the surprisingly positive development of gross domestic product in the third quarter, a weak fourth quarter looms.”

Manufacturing and industrial production also fell in France in September, though the respective declines of 0.4% and 0.8% from the previous month were less than the 1.3% and 1% median estimates from economists.

Sapping Demand

Factories in the whole region are struggling with record inflation that is sapping demand for their goods. Surveys by S&P Global signaled this week that the euro area’s manufacturing sector is already in recession, with Germany among the worst-performing nations.

Firms in the country have had to reduce their reliance on Russian natural gas quickly after supplies were cut as President Vladimir Putin pursues his war in Ukraine. While the likelihood of winter shortages has decreased thanks to a mild start to the heating season, a jump in prices is weighing on companies and households.

Carmaker Stellantis NV on Thursday said consumers in Europe are slightly dialing back car purchases, joining Germany’s BMW AG in warning the region is on the back foot due to surging costs.

German orders for consumer goods still rose 7.2% in September, but producers of capital goods used for manufacturing and providing services saw a 6% decline from the previous month, according to the statistics office. More orders were completed than new ones received for the first time since May 2020, despite continued supply-chain tensions.

--With assistance from Harumi Ichikura and Kristian Siedenburg.

(Updates with French figures in fifth paragraph)

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