* Euro zone orders up 2 percent m/m, down 23.1 percent y/y
* Services, manufacturing PMIs also show expansion
* Economists expect euro zone to return to GDP growth in Q3
(Adds economist comments)
By Jan Strupczewski
BRUSSELS, Oct 23 (Reuters) - Industrial new orders in the euro zone rose more than expected on the month in August on demand for intermediate goods, data showed, underlining expectations of a recovery in the third quarter and beyond.
Orders in the 16-country area rose 2.0 percent from July, the European Union's statistics agency said on Friday. They were 23.1 percent lower than a year earlier.
Economists polled by Reuters had on average expected a 1.2 percent monthly increase and a 22.5 percent year-on-year fall. Industrial new orders point to trends in economic activity as they translate into production over the coming months.
"Following on from the purchasing managers' survey ..., this reinforces hopes that industrial production will continue to improve after rising for a fourth month running in August, and will make a significant contribution to euro zone recovery," said Howard Archer, economist at IHS Global Insight.
The purchasing managers' survey for October also showed that overall euro zone manufacturing activity expanded in October for the first time since May 2008.
Eurostat revised its orders data for July, saying they grew by 3.0 percent against June rather than the earlier reported 2.6 percent. Their annual decline was larger, at 24.9 percent versus the initially reported 24.3 percent.
The August rise was led by demand for intermediate goods, up 3.8 percent on the month. Orders for capital goods, durable and non-durable consumer goods fell on the month, suggesting weakness in consumer and investment demand after a July rally.
GROWTH RETURNS
Economists expect the euro zone returned to growth in the third quarter after it started shrinking quarter-on-quarter in the second quarter of 2008, hit by a global economic slowdown brought on by the credit crunch.
Without volatile orders for ships, planes and trains, orders performed more strongly -- rising 2.4 percent month-on-month for a 22.7 percent annual decline. August was the fourth straight month of rising orders after a decline in April. Eurostat revised up its June data to a 4.2 percent monthly gain from the 4.0 percent rise reported earlier.
But continued production growth was not assured yet, especially with the euro's value rising sharply.
There was also food for thought from British GDP numbers, which failed to meet forecasts of a return to growth, instead making its recession the longest on record.
"For sustained, significant manufacturing expansion to occur, there needs to be extended robust growth in orders from both domestic and foreign markets and this currently remains far from certain, particularly as euro zone manufacturers will not be helped by the euro trading at a 14-month high of $1.50," Archer said. (Editing by Dale Hudson)