The UK economy showed further signs of growth in October, although confidence remains weak, according to new figures.

It's the same old story - manufacturers in trouble while the services sector remains in relatively good shape

Audrey Childe-Freeman, economist, CIBC World Markets

A survey of the private service sector, which makes up about two thirds of the UK economy, from the Chartered Institute of Purchasing and Supply (CIPS) showed higher levels of activity than expected.

And the CBI said high street shop sales had rallied to their highest level since May.

But the relatively robust figures contrasted strongly with official figures for manufacturing industry, which showed continued falls in output.

"It's the same old story with the discrepancy in the UK economy - manufacturers in trouble with little hope for improvement while the services sector remains in relatively good shape," said Audrey Childe-Freeman, an economist at CIBC World Markets.

Car splutters

Manufacturing output was down 0.4% in September according to figures from the Office for National Statistics (ONS) and is now 2.6% lower than at the same time last year.

Retailers have recovered from August's stutter and now look forward to more healthy sales

Alastair Eperon, CBI

Car output saw the biggest fall, down 12.2% in September

Warm weather meant a 5.7% drop in electricity and gas output.

Economists said the poor figures could add weight to calls for a further cut in interest rates, which have been left at 4.0% since last November.

However, the services sector painted a different picture, with business activity rising to its highest level since May and prompting suggestions that the economic recovery is continuing.

More for less

CIPS said all sectors in the survey, including hotels, restaurants, transport groups and financial services, reported higher levels of new business.

But it would be wrong to herald the return of a retail boom

Alastair Eperon, CBI

Companies attributed the rise in new contracts and projects to an improved economic environment.

However, the gains came at a price.

Staffing levels fell for the 13th month in a row as companies tried to cut costs while raising productivity.

And ongoing competition meant over 90% of businesses kept their rates and prices at the same level or lower.

Shopping boom on hold

Meanwhile, the Confederation of British Industry (CBI) found high street sales were also at their highest level for five months.

CBI chairman Alastair Eperon said: "Retailers have recovered from August's stutter and now look forward to more healthy sales".

The latest figures suggested 44% of businesses saw sales up on last year's numbers, while 19% saw a drop in sales.

However, Mr Eperon cautioned that while figures are better than they have been since May, they are still lower than at the start of the year.

"It would be wrong to herald the return of a retail boom," said Mr Eperon.

"It is significant that retailers continue to believe sales are below average for the time of year."

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