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German industry orders surge in Sept, trend more muted

By Michelle Martin

BERLIN, Nov 6 (Reuters) - German industry orders climbed far more than forecast in September, though a less volatile two-month average showed a much more muted rise, suggesting that the industrial sector is slowly recovering after a weak start to the year.

Manufacturing, which makes up around one fifth of Europe's biggest economy, struggled in early 2013 but seasonally-adjusted data from the Economy Ministry on Wednesday showed factories took on 3.3 percent more new orders in September.

That was largely due to above-average demand for big-ticket items and an increase in bookings from the euro zone. The two-month average showed contracts increasing by 0.4 percent in a sign that orders are on an upward trend.

The euro rose to a session high versus the dollar after the data.

"Overall the data is very positive," said Postbank economist Thilo Heidrich. "One thing in particular stands out - orders from the euro zone increased strongly and that gives reason to hope that the economic recovery is spreading beyond Germany."

Foreign bookings jumped by 6.8 percent as euro zone demand rose by 9.7 percent. Contracts from the single currency bloc for capital goods even soared by 23.6 percent.

But the ministry said impetus from abroad was rather weak despite this rise and the two-month comparison showed a 0.5 percent drop.

Domestic orders dropped by 1 percent on the month but were up by 1.5 percent in the two-month comparison. The ministry said the data confirmed the revival of the economy was increasingly being driven by demand at home.

The German government expects trade to be a drag on economic growth this year as the euro zone crisis and a slowdown in emerging markets weaken demand for German exports and is instead relying on domestic demand to drive growth.

Wednesday's data, combined with a recent purchasing managers' survey which showed the manufacturing sector expanding faster in October thanks to rising output and order levels, nonetheless suggests the industrial sector is reviving.

But some industrial companies are downbeat. Steel distributor Kloeckner & Co has, for example, launched further restructuring measures due to subdued steel markets.

Other recent data has been rather downbeat, with unemployment rising, business morale dropping and consumer morale weakening, though the private sector has grown.

While the German economy put in a strong performance during the early years of the euro zone crisis, it weakened last year and suffered a subdued start to 2013. It bounced back in the second quarter but economists generally expect slower albeit solid growth for the remainder of this year.