(Recasts with economists' comments)
By Jan Strupczewski
BRUSSELS, June 25 (Reuters) - Euro zone industrial orders plunged by more than a third year-on-year in April, a record decline led by capital and intermediate goods that pointed to continued contraction of the economy, data showed on Thursday.
Orders fell 1.0 percent month-on-month for a 35.5 percent annual drop, European Union statistics office Eurostat said. Economists polled by Reuters had expected a flat monthly reading and a 32.3 percent year-on-year fall. [ID:nBRQ007402]
"If you play the 'green shoot' game, it is better to avoid the hard data," said Martin van Vliet, economist at ING.
Sentiment surveys have shown improvement in business confidence suggesting the worst economic downturn since World War Two was bottoming out in what economists dubbed the "green shoots" of a recovery.
"The April industrial orders figures serve as a timely reminder that economic activity in the 16-country region is still contracting noticeably," Vliet said.
The economy of the 16 countries using the euro shrank 2.5 percent quarter-on-quarter in the first three months of the year and the European Commission expects it will contract another 0.6 percent in quarterly terms in April-June.
Orders for intermediate and capital goods, which reflect on investment trends, fell 38.3 percent and 39.1 percent annually respectively, underlining the depth of the economic recession.
Orders for durable consumer goods dropped by 26.0 percent in annual terms and non-durables by 8.9 percent.
But economists noted that adjusted for falling producer prices, the new orders data was less grim.
"In real terms, the new orders have been positive in February and in March and in April, it looks like it's only a small, or negative number, so orders are at the bottom at the moment," said Joerg Angele, economist at Bayerische Landesbank.
"So we think we will see some increases in the next month," he said.
Depleted inventories should also help boost orders.
"It looks like firms have to start producing again next month because inventories are pretty low at the moment. So it indicates a bounce back in orders in the next month," he said.
The latest euro zone Purchasing Managers' Index also pointed to a brighter future, economists said.
"Matters have moved on significantly since April and ... the purchasing managers index indicates that overall manufacturing activity contracted at the slowest rate for nine months in June," said Howard Archer, economist at IHS Global Insight.
"The total orders, export orders, backlogs of work and output sub-indices all rose to their highest levels for at least nine months in June. Nevertheless, they were all clearly still in contraction territory," he said. (Reporting by Jan Strupczewski; Editing by Mike Peacock)