Germany's VDMA sees engineering output growth steady at 3 pct in 2018

FRANKFURT, Dec (Shanghai: 600875.SS - news) 12 (Reuters) - German engineering output is likely to grow at a steady 3 percent next year as domestic manufacturers begin to reinvest in equipment, compensating for slower export growth to China, industry association VDMA said on Tuesday.

Engineering is the backbone of Germany's export-led economy - which is set to grow by more than 2 percent this year - generating an expected 224 billion euros ($264 billion) in sales this year and employing about 1.35 million people.

"Many of the older machines and equipment in the market are unlikely to be able to cope with advancing digitisation. That gives us confidence that domestic orders will finally pick up," VDMA President Carl Martin Welcker told a news conference.

The association added, however, that the industry would continue to have to live with many uncertainties that could prevent growth from accelerating - including Britain's path to exit the European Union.

German engineering exports to Britain fell 4.5 percent in the first nine months of 2017, and the VDMA said it estimated that German engineers could face additional costs of more than 180 million euros a year if the UK left the customs union.

German exports as a whole fell unexpectedly in October, as did industrial exports, although industrial orders rose. Traditionally dependent on industrial exports, the economy is currently being lifted by domestic consumption. ($1 = 0.8495 euros) (Reporting by Georgina Prodhan; Editng by Victoria Bryan)