Euro zone industrial new orders slumped in September from August, EU statistics showed on Wednesday, the deepest fall since December 2008 and far worse than economists had forecast, in the latest sign that Europe may be heading for a recession.

New orders in the 17 countries sharing the euro tumbled 6.4 per cent, well below expectations of a 2.5 per cent fall, with Germany, France, Italy and Spain all registering sharp contractions, the EU’s Statistics Office Eurostat said.

Orders of capital goods, a measure of investment in new machinery, fell the most in September compared to the previous month, sliding 6.8 per cent and suggesting factory managers and companies made a clear call to pull back expansion plans.

On an annual basis, industrial new orders in the euro zone rose 1.6 per cent in September, while economists polled by Reuters expected an 8.0-per-cent increase.

The euro zone’s sovereign debt crisis that has now reached Italy and France has shattered business confidence. Manufacturing, which had powered a two-year recovery since the end of the global financial crisis in 2009, has now stalled.

Even though euro zone gross domestic product grew slightly in the third quarter, the September data signals that European companies are scared to invest and that the bloc risks sliding back into recession by the end of the year.

Falling export demand from Asia, fewer new orders, unemployment at 10 per cent and the ever weaker confidence are combining to create a very difficult business environment.

Euro zone consumer confidence, released on Tuesday, also fell sharply in November.