German manufacturing activity grew at its fastest rate in almost three years in December, a survey showed yesterday, confirming industry in Europe's largest economy picked up strongly in the final quarter of 2003.

The purchasing managers' index (PMI) stayed above the 50 mark that separates expansion from contraction for a fourth month as growth in new orders and output accelerated. The seasonally adjusted index hit 53.0 in December, its highest since January 2001, from 51.1 in November.

The new orders part of the index rose to 56.8, its highest level since August 2000, from 54.7 in November, while the new export orders component climbed to 57.0, also a 40-month high, from 55.3.

Both new orders and export orders indices have now increased for five straight months, despite the rise in the euro to record highs against the dollar in late December.

"Particular mention of export strength referred to improving demand from the United States and Asian markets - specifically China," NTC, which compiled the study, said in a statement.

Some of the 400 companies surveyed indicated conditions in key western European economies were also improving, while eastern Europe was favourable.

Britain's manufacturing sector also accelerated last month, pointing to a strong recovery this year. The PMI rose to 56.0 from an upwardly revised 54.7 in November and well above the average forecast of 55.0. It was also the best since December 1999 and the 10th monthly improvement in a row.

The French manufacturing sector expanded for the third month running in December, although the rate of growth slowed.

The PMI registered 51.9, down from November's reading of 52.7. - (Reuters)