October 3, 2016 / 8:02 AM / a year ago

Growth in German factory activity hits three-month high in September - PMI

An employee of German car manufacturer Mercedes Benz observes the connection between the bodywork and the chassis of an A class (A-Klasse) model at their production line at the factory in Rastatt, Germany, January 22, 2016.Kai Pfaffenbach

BERLIN, (Reuters) - German manufacturing growth accelerated to a three-month high in September, partly driven by stronger demand from abroad, a survey showed on Monday, suggesting factories will contribute to an economic expansion in the third quarter.

Markit's Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of the economy, rose to 54.3 from 53.6 in August.

That was in line with a flash reading and well above the 50 line that separates growth from contraction. The PMI average

reading for the third quarter as a whole stood at 53.9, the highest quarterly reading since the start of 2014.

"Germany's manufacturing sector ended the third quarter on a positive note," Markit economist Oliver Kolodseike said.

Firms increased production to satisfy rising demand and hired staff at a pace not seen since the start of 2012, he said.

He added that inventories fell at the strongest rate in over 6-1/2 years, suggesting manufacturers are likely to further

increase output in coming months to replenish stock.

"Industry should therefore have a positive contribution to GDP growth in the third quarter," Kolodseike concluded.

The survey was another positive sign after Ifo's closely watched business climate index showed last week that morale among executives improved far more than expected in September.

Both surveys give some relief after weaker-than-expected output data for July raised concerns that the economy could be

heading towards a sharp slowdown in the second half.

The economy grew 0.7 percent in the first quarter and 0.4 in the second. For the year as a whole, economic institutes predict a growth rate of 1.9 percent, mainly driven by soaring private consumption and higher state spending on migrants.

Reporting by Michael Nienaber; Editing by Hugh Lawson

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