BERLIN The downturn in Germany's residential construction sector intensified in July, according to a survey published on Monday, which showed a record number of companies complaining about dwindling orders in the sector.

In July, the percentage of companies suffering from a lack of orders grew to 40.3%, up from 34.5% in June and just 10.8% in July 2022, the Ifo economic institute said.

"A storm is brewing. Following many years of expansion, now higher interest rates and the drastic rise in construction costs are choking off new business," said Klaus Wohlrabe, Ifo's head of surveys.

While the percentage of construction companies complaining about cancelled orders eased somewhat in July to 18.9%, that was still well above the long-term average of 3.1%.

Many companies are getting by on order backlogs, Ifo said, but its survey showed 10.5% of companies in the sector reporting financial difficulties - double the figure a year prior.

Data released last week showed a 27% fall in building permits for apartments in Germany in the first half of 2023 as the cost of building rises and the European Central Bank raises interest rates to fight inflation.

(Reporting by Rachel More, Editing by Miranda Murray)