Falling export demand hit Germany's key mechanical engineering sector in July, wiping out a strong rise in domestic demand, the VDMA industry federation said Thursday.

Overall incoming orders were down by 3.0 percent in July compared with the same month in 2012, VDMA said in a statement, with export orders falling by 9.0 percent, while domestic orders were up as much as 10 percent. The data provide a snapshot of activity in a crucial sector of Europe's biggest economy.

Taking a three-month comparison to iron out short-term fluctuations, overall orders declined by 4.0 percent in the period from May to July, with foreign orders falling by 5.0 percent and domestic orders down by 3.0 percent, VDMA calculated.