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Bundesbank sees German growth continuing in second half

FRANKFURT (Reuters) - Germany's economy is on track to grow in the coming months despite a weak start to the third quarter, the Bundesbank said in its monthly report on Monday, pointing to impetus from solid domestic demand.

A business survey showed earlier on Monday that Germany's private sector grew in September at its fastest rate since January, indicating that Europe's largest economy would grow again this quarter, albeit less than in the previous three months.

After shrinking in the fourth quarter of 2012 and suffering a subdued start to 2013, the German economy expanded 0.7 percent in the April to June quarter thanks mainly to domestic demand.

The Bundesbank noted that German industry output fell 1.7 percent in July from the previous month, but said the economy would continue to grow.

"A noticeable improvement in expectations for production and exports as well as a slow increase in incoming orders point to growth in coming months," the Bundesbank said in its September monthly report.

"The extraordinarily good consumer sentiment continues, supported by slowing inflation and an overall good situation on the labour market," it added.

There were some signs of investment solidifying, but no clear indications of a robust revival, the central bank added.

(Reporting by Eva Taylor; editing by Patrick Graham)