BERLIN (AP) – German factory orders, a leading indicator of the health of Europe’s biggest economy, dropped sharply in July, erasing the previous month’s gains.

The Federal Statistical Office reported Thursday that industrial orders dropped 2.7% in July from June when adjusted for seasonal and calendar factors, wiping out a 2.7% June increase.

Domestic orders dropped 0.5% while foreign orders fell 4.2% compared with June.

The Economy Ministry says “ongoing growing international trade conflicts and restrained expectations from manufacturing businesses indicate no fundamental improvement in industrial growth in the coming months.”

Germany’s economy contracted by 0.1% in the April-June period. It’s expected to decline again this quarter, placing it in a technical recession.

ING economist Carsten Brzeski says the drop in orders “doesn’t bode well at all” for the third quarter.