Falling export demand hit Germany's key mechanical engineering sector in May, the VDMA industry federation said on Tuesday.

The manufacture of machine tools is an important part of Germany's industrial and export performance.

In May, overall incoming orders were down by 2.0 percent compared with the same month a year earlier, VDMA said in a statement, with export orders falling by 4.0 percent while domestic orders rose by 5.0 percent.

Taking a three-month comparison to iron out short-term fluctuations, overall orders were down by 3.0 percent in the period from March to May.

Foreign orders dropped by 8.0 percent, while domestic orders rose by 9.0 percent, VDMA calculated.

"Following the satisfying increase in April, domestic orders remain on their growth path," said VDMA's chief economist Ralph Wiechers.

"But once again, orders from overseas fell short of previous year's levels."

In particular, orders from countries outside the eurozone are in decline, Wiechers noted.