German retail sales fell 1.8 per cent in June, according to the latest disappointing economic data released yesterday by Germany's Federal Statistics Office. It was followed by news from German exporters that they expect foreign orders to be down by up to 12 per cent this year.

According to the German Exporters' Association, car firms are also feeling the effects of the slowdown, with car manufacturers saying yesterday that July sales were down 3 per cent on the same time last year.

The latest data will add to growing fears that the export-reliant German economy is feeling the effects of the US slowdown and heading for recession.

It will also add to pressure on the European Central Bank (ECB) to cut interest rates after its summer break.