The worst may be over for Britain's factories

The Chartered Institute of Purchasing and Supply (CIPS) on Wednesday said its manufacturing index - a closely-watched barometer of activity in the sector - climbed to 52.9 in September, up from 52.2 the previous month.

A reading above 50 on the CIPS index denotes expansion, while a score below 50 indicates contraction.

The reading for September marked the third straight month of growth, and comfortably outstripped analysts' expectations, with most forecasters predicting a score of just 52.4.

Detailed CIPS data showed that while manufacturing output expanded at a slower pace than in August, new orders grew more quickly, and employment increased for the first time in nearly four years.

Currency effect

Geoffrey Dicks, chief economist at Royal Bank of Scotland, described the figures as "encouraging".

"The composition of the (index) suggests more to come, with a very strong orders number, both in aggregate and for exports," he said.

The latest CIPS numbers tally with other recent surveys pointing to a change of fortune for the UK's hard-pressed manufacturers.

The sector, pressured by a strong pound and stiff competition from low-cost economies in Asia and eastern Europe, has been alternating between stagnation and outright recession for the last three years.

The current recovery partly reflects a rise in the value of the euro against the pound since the beginning of the year, making UK-manufactured goods more competitive in Europe.

High Street latest

News of the pickup in manufacturing coincided with fresh figures pointing to a solid recovery in retail sales after stifling summer heat kept shoppers at home in August.

In a monthly survey of the retail sector carried out by the Confederation of British Industry, 43% of store owners said trade improved in September, while 26% reported a decline.

The positive balance of 17% is up from just 12% in August.

Expectations for October remain upbeat, with a balance of 25% of retailers forecasting stronger sales in the month ahead.

"Retailers will be pleased that sales have gone on growing at a reasonably healthy rate despite household incomes being squeezed by tax increases, low wage rises, and mixed jobs market," said CBI chief economist Ian McCafferty.