Operating conditions in the UK manufacturing sector showed a further improvement in October, with the rate of growth the fastest in 2005 so far. The seasonally adjusted CIPS/RBS Purchasing Managers' Index rose slightly to 51.7. The PMI has remained above the neutral 50.0 mark for three consecutive months, with the latest figure indicative of moderate expansion.

Supporting the improvement in operating performance were solid gains in output and new orders. However, these failed to prevent further job losses, as companies offset higher purchase prices through lower employment.

Manufacturing production expanded for the fifth month running. The seasonally adjusted Output Index posted a reading of 53.1, as firms raised output in response to improved levels of incoming new business.

The downturn in UK manufacturing employment continued in October, although the rate of decline eased to its least marked during the current period of workforce reduction.

Roy Ayliffe, Director of Professional Practice at CIPS, said: "Purchasing managers saw the fourth quarter open with a further improvement in operating conditions in the UK manufacturing sector. This was underpinned by a strong rise in output, which experienced its best performance since January. Growth was also supported by solid gains in new work, bolstered partly by increased demand from domestic and export clients. Despite improved conditions, however, the expected recovery in employment was not realised, as companies reported offsetting soaring input price inflation by reducing their workforces."