ISTANBUL Turkish factory activity contracted for the third consecutive month in September, although only very slightly due to a less pronounced slowdown in output and new orders, a survey showed on Monday.

The Purchasing Managers' Index (PMI) for manufacturing rose to 49.6 from 49.0 in August, according to the survey by the Istanbul Chamber of Industry and S&P Global, holding just below the 50-point line that denotes growth in activity.

Production eased for the third month running, reflecting weak market conditions and a slower pace of new business coming in. Some firms saw demand holding up over the month, however.

Anecdotal evidence showed price pressures restricted customer demand and hence new orders slowed overall, but at a softer pace than that of August.

Input costs and output prices rose due to currency weakness but the rate of inflation slowed, while employment continued to rise very slightly. However some firms scaled back staffing amid less new orders.

"There were signs of stabilisation in the Turkish manufacturing sector during September as some firms reported that demand had held up well over the month," said Andrew Harker, economics director at S&P Global Market Intelligence.

"Although business conditions remained challenging overall, the latest data provide some hope that a return to growth can be recorded before the end of the year. One help to firms in September was a marked easing of inflationary pressures."

(Reporting by Ezgi Erkoyun; Editing by Hugh Lawson)