The Chartered Institute of Purchasing and Supply’s headline purchasing managers’ index (PMI) for UK manufacturing rose from 49.9 in September to 53.7 last month – surging through the level of 50 which separates expansion from contraction.

The October reading signals the fastest pace of expansion in the UK manufacturing sector since November 2007, and was way ahead of the no-change reading of 50 forecast by the City.

The monthly rise in the manufacturing PMI in October was the third-sharpest increase in the history of CIPS’ survey of the sector – which began in 1992.

The manufacturing PMI is a composite indicator which takes in output, new orders, employment, suppliers’ delivery times and stocks of goods purchased, and is designed as a measure of overall activity in the sector.

UK manufacturers enjoyed their fastest monthly growth in new orders in 69 months in October, according to CIPS’ latest survey.

Manufacturing output, like overall activity in the sector, grew at its fastest pace since November 2007.

However, accountancy firm Ernst & Young’s ITEM Club economic think-tank warned yesterday that “it seems unlikely that there will be sufficient demand in the longer run to sustain robust growth”, after the one-off benefits of the Government’s car-scrappage scheme and stock cycle have passed.

And manufacturing firms continued to shed staff at a significant pace in October.

CIPS’ seasonally-adjusted manufacturing PMI had fallen unexpectedly below 50 in September, from 50.5 in August, and this had raised concerns over the state of the economy.

These fears mounted when official data last month dashed hopes that the UK economy would have exited deep recession in the third quarter.

The Office for National Statistics (ONS) said UK gross domestic product had fallen by a further 0.4% in the three months to September 30. The City had predicted modest growth.

This continuing contraction in the three months to September meant that UK GDP had fallen for six consecutive quarters – making this the longest UK recession since comparable records began in 1955.

The French and German economies emerged from recession in the three months to June, according to official data. And the US economy returned to growth in the third quarter, according to data published last week by the American Commerce Department.

Data from the ONS last month showed a 2.5% month-on-month plunge in UK industrial production during August.

But economists voiced hopes, in the wake of yesterday’s more timely manufacturing survey from CIPS, the UK economy may emerge from recession in the fourth quarter to December 31.

Howard Archer, chief UK economist at consultancy IHS Global Insight, said: “At last, some really good news on the UK economy with data for once substantially surprising on the upside.

“The October manufacturing purchasing managers’ survey was markedly stronger than expected, thereby alleviating some of the fears that had mounted over the sector following August’s 2.5% month-on-month slump in industrial production.”

He added: “Indeed, the October manufacturing purchasing managers’ survey markedly boosts hopes that the economy will finally return to growth in the fourth quarter after disappointingly continuing to contract in the third quarter, although it must be borne in mind that manufacturing only accounts for 13.3% of GDP by gross value-added.”

Archer noted that the much-improved UK manufacturing PMI followed a generally more upbeat survey of the sector’s performance in October from the Confederation of British Industry.

He added: “This raises belief that the shock 2.5% month-on-month plunge in industrial production in August really was primarily due to a significant number of firms deciding it was most economical to completely shut down for a holiday period and allow stock levels to be depleted further.”

CIPS’ latest survey showed that UK manufacturers enjoyed a third consecutive monthly rise in exports in October.

This suggests that manufacturers may be feeling some benefit from the weaker pound. Sterling has been weak against the euro, making manufacturers in Scotland and elsewhere in the UK more competitive in major export markets such as France.

Jonathan Loynes, chief European economist at consultancy Capital Economics, said: “The CIPS reports, particularly on services, gave a misleadingly strong impression of activity in Q3, so it is worth treating today’s report with a little caution.”

But he added: “At face value, the survey provides early hope that the UK economy will finally emerge from recession in Q4.”