German manufacturing sector posts modest growth at start of third quarter - PMI

BERLIN, Aug 3 (Reuters) - German manufacturing activity rose slightly for the eighth straight month in July, a survey showed on Monday, in a sign that a major sector of Europe's largest economy began the third quarter in growth mode. Markit's purchasing managers' index (PMI) for manufacturing, which makes up about one fifth of the German economy, stood at 51.8 compared with 51.9 in June. That was above the 50 line that separates growth from contraction and was slightly higher than a preliminary estimate of 51.5. "The German manufacturing sector remained stuck in a low gear at the start of the third quarter, with the PMI signalling further, albeit only modest, growth," said Oliver Kolodseike, economist at Markit. Factory output increased for a 27th straight month, though the rate of expansion was marginally weaker than in June. New contracts continued to pile in but the rate of increase was below the survey's average. In a sign of optimism, manufacturers - particularly consumer goods producers - stepped up recruitment, and they continued to make more purchases, with the pace of buying activity above the 2015 average despite being weaker than in June. On the downside, volumes of new orders from abroad fell for the first time in six months. Manufacturers continued to raise their selling prices to compensate for higher costs, which some participants put down to exchange rate effects and a dearth of some raw materials, but the rate of inflation was stable. That suggests "Germany's trip into deflationary territory at the start of the year was only temporary", said Kolodseike. Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence. ((Reporting by Michelle Martin; Editing by Hugh Lawson); ((MichelleHannah.Martin@thomsonreuters.com; +49 30 2888 5223; Reuters Messaging:; MichelleHannah.Martin.thomsonreuters.com@reuters.net)))