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* Orders fall 1.7 pct m/m vs forecast of -1.0 pct
* Recent data suggests Ukraine, Iraq weighing on demand
* However, order from euro zone rise 5.7 pct in May
BERLIN, July 4 (Reuters) - German industrial orders fell in May for the first time in two months and more sharply than expected due to a perceived increase in geopolitical risk, the Federal Statistics Office said on Friday.
Domestic orders as well as those from overseas were weak although orders from the rest of the euro zone rose and industrial orders were still expected to increase over the second quarter as a whole from the previous three months, the office said.
Orders fell by 1.7 percent from April after an upwardly revised 3.4 percent increase in April. The drop in May compared to a Reuters consensus forecast for a fall of 1.0 percent and came towards the lower end of the range of forecasts.
"Because of the good start to the second quarter we can still expect a rise in industrial orders for the second quarter as a whole," said the Statistics Office. "But a certain caution can be observed because of the increase in political risks."
The Statistics Office did not specify which areas were of concern but economists such as the influential Munich-based Ifo think tank say business is worried about the Ukraine crisis and the impact on oil prices of the insurgency in Iraq.
Consumer goods' companies saw bookings fall 1.2 percent after the previous month's sharp increase, intermediate goods' orders retreated 3.4 percent and capital goods' orders were down 0.7 percent after rising strongly in April.
Domestic orders for German industrial goods fell 2.5 percent and contracts from abroad slipped 1.2 percent, though there was a 5.7 percent increase in orders from the euro zone.
Economist Alexander Krueger of Bankhaus Lampe said he still expected orders to expand overall in the second quarter and did not think the May data would weigh more on GDP, which is already seen slowing a little to 0.2 percent growth in the quarter.
"We expect growth to outperform in the second half of the year. Growth is robust and broadly spread and there will be a further boost from investments," he said. (Reporting by Stephen Brown and Klaus Lauer; Editing by Susan Fenton)