Rising foreign demand boosted Germany's key mechanical engineering sector in March, the VDMA industry federation said Wednesday.

The manufacture of machine tools is a key driver of German industry and exports.

In March, overall incoming orders rose by four percent compared with the same month a year earlier, VDMA said in a statement.

Domestic orders inched one percent higher and export orders jumped by six percent, VDMA added.

Making a three-month comparison to iron out short-term fluctuations, VDMA said overall orders rose by two percent in the period from January to March.

Foreign orders increased by three percent in the first quarter, while domestic orders slipped by two percent, VDMA calculated.

"Exports set the pace again in March, while domestic orders rose only slightly," said VDMA's chief economist Ralph Wiechers.

Nevertheless, the sector had not experienced a real upturn just yet.

"The low exchange of the euro is not yet having a real effect," Wiechers said.