(BRUSSELS) - Factories in the 15 nations sharing the euro saw orders fall by 0.3 percent in June, official figures showed Friday, a gentler drop than expected but doing little to ease stagnation fears.

The 0.3 percent fall in new industrial orders was far more palatable than the 5.4 percent plunge suffered in May and well below the 1.6 percent drop predicted by experts polled by Dow Jones Newswires.

Nevertheless the latest figures -- which exclude ships, railway and aerospace equipment -- mean an annual 7.4 percent fall in orders from June 2007 to June 2008, according to the European Union's Eurostat data agency figures.

On top of that, Eurostat revised the May figures to a 5.4 percent fall from an earlier estimate of 3.5 percent, highlighting the problems European industry faces amid soaring oil prices, a historically high euro and the credit crunch born of the US subprime loan crisis.

"The evidence shows that the eurozone economy has fallen into semi-stagnation or worse," said the Bank of America's Holger Schmieding.

The biggest eurozone economy, Germany, has seen its order books shrink each month this year and June was no different with a 3.5 percent drop.

Meanwhile French industry was stagnant with a 0.1 percent rise after a 6.3 percent fall in May.

In the 27-nation European Union as a whole, new orders fell by just 0.1 percent in June after also dropping by 5.4 percent in May.

Friday's figures came hard on the heels of an influential survey which showed that manufacturing activity in the eurozone fell for the third straight month in August, with output down in both the manufacturing and services sectors.

The eurozone's purchasing managers' index (PMI), compiled by data and research group Markit, rose slightly to 48.0 in August from 47.8 points in July, according to the initial estimate.

A level below 50 for the index indicates a contraction of activity in the sector.

"The further decline in industrial orders published today confirms the downbeat message from leading indicators: the eurozone economy is heading for trouble," Schmieding said of the fourth such decline in five months.

The 7.4 percent annual drop in orders was "the worst outcome since the recession-type result of December 2001," he added.

Softer demand from abroad and the strong euro seem to have exacerbated the downturn in Eurozone industry.

A slight uptick in domestic core orders in the second quarter was overwhelmed by a much larger fall in foreign orders.

Schmeiding said that with the stalling of the manufacturing "engine" of the eurozone, "We look for the Eurozone economy to grow hardly at all in the second half of this year."

Fortunately, the bank's outlook for 2009 is less bleak thanks to recent corrections in oil prices and exchange rates.

"Lower inflation will probably more than offset the hit which the real disposable income of households will suffer from the likely rise in unemployment in 2009.

"Domestic and foreign demand could both recover over the course of next year," said Schmeiding.

On a sector basis, orders for textiles grew by 2.2 percent in the eurozone while electrical and electronic equipment increased by 1.4 percent. Chemical products were also up.

However in the red ink column, machinery and equipment orders fell by 1.1 percent in the 15 eurozone nations with transport equipment down 3.7 percent.

Industrial new orders - Eurostat

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