German industrial output experienced a significant decline in June, according to official data released on Monday.

The German economy ministry warned of a pessimistic outlook for the economy attributing the slump to surging energy prices and elevated interest rates that have adversely impacted various sectors of industry.

The recently published data by the Federal Statistics Office Destatis revealed that industrial output fell for the second consecutive month. In May industrial output decreased by 0.1% whereby in June it dropped by 1.5%.

Analysts anticipate a more moderate decline of 0.5% to follow, indicating the severity of the economic downturn.

Germany's crucial industrial heavyweight, the automobile sector, experienced a significant drop of 3.5%, further exacerbating the overall decline. The situation is exacerbated by fluctuations in significant orders, which have significantly impacted the industrial economy, despite rising demand.

"The outlook for the industrial economy remains gloomy despite the rising demand because these are strongly affected by fluctuations of big orders," the economy ministry said.

"Given the subdued business and export expectations of companies, there is currently no sign of a noticeable recovery."

Commenting on the situation, Carsten Brzeski, an analyst from ING, emphasized that the latest data indicates an ongoing stagnation in the country's economy and warned of further deterioration.

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"With today's numbers, the risk has increased that the flash estimate of stagnating GDP growth in the second quarter could still be revised downwards," he said.

This downturn follows Germany's unexpected entry into a mild recession in late 2022 and early 2023. The recession stemmed from the energy crisis which followed the Western sanctions on Russia leading to higher interest rates on companies and households. The combination of these factors has caused significant strain on the nation's economic stability.

According to the Bundesbank's most recent forecasts in June, Europe's largest economy is projected to contract by 0.3 percent in 2023, signaling challenging times ahead for Germany's economic recovery.

Read more: German economy dives into recession in Q1

Similarly, it was reported last month that German industrial production decreased in May stoking concerns about a protracted slowdown in Europe's largest economy.

According to seasonally adjusted data from the federal statistics agency Destatis, output in the manufacturing hub decreased by 0.2% from April.

Carsten Brzeski cautioned that the most recent data indicated that the "German industry is still stuck in stagnation," adding that it would need an activity surge in June to avoid an extension of the recession."

In turn, the Federal Ministry for Economic Affairs and Climate Action of Germany sought to be optimistic despite the negative data and said "The recent stabilization of demand points to a recovery -- albeit moderate to begin within the industrial economy in the coming months," and warned that somber indicators in the past two months "have not taken away the risk of a further contraction of the German economy."

Read more: German economy unlikely to improve in the short-term: Experts