BERLIN, Nov 2 Reuters Germany39;s manufacturing sector, which accounts for about a fifth of its economy, remained mired in a downturn in October due to weak demand, a survey showed on Thursday.

The HCOB final Purchasing Managers39; Index PMI for manufacturing rose to 40.8 in October from 39.6 in September, increasing for the third month in a row but still far below the 50 level that separates growth from contraction.

It seems clear that manufacturing is still in a downturn for the current year, said Cyrus de la Rubia, Hamburg Commercial Bank HCOB chief economist. Yet, signs are pointing towards a potential rebound by the first half of next year.

Contributing to the headline PMI39;s rise to a fivemonth high was a slower decrease in output, with production posting the least marked decline since June, the survey showed.

Reports from surveyed businesses suggested customers were destocking and generally holding back on investments against a backdrop of uncertainty and high interest rates.

Pressure on supply chains continued to ease due to weaker demand, which at the same time contributed to further declines in both input costs and output charges as businesses reported strong competition for new work, according to the report.

Firms39; expectations towards future production, although still pessimistic, showed a slight improvement.

Going against this trend was a solid and accelerated reduction in factory workforce numbers, the report showed.

Yet, when comparing to…