BERLIN (Reuters) - The German VDMA industry association raised its 2017 production forecast on Thursday, citing strong demand from euro zone countries, Asian markets and domestic clients.

VDMA said it now expected engineering production to rise by 3 percent on the year in real terms in 2017, up from its previous estimate of an 1 percent increase.

"Business morale is really good. Everything is set for a new upswing," VDMA economist Ralph Wiechers said.

The association said engineering orders jumped 17 percent in real terms in May from the previous year. Orders from abroad rose 23 percent, with demand from euro zone countries jumping 34 percent, the VDMA said. Domestic orders for machinery and other engineering products were up 5 percent.

In the less volatile March-May comparison, orders rose by 4 percent on the year, VDMA said. Domestic demand was up by 2 percent and foreign orders rose 4 percent.

(Reporting by Michael Nienaber; Editing by Maria Sheahan)