The headline purchasing managers' index (PMI) - a composite indicator of economic activity published by CIPS and NTC Research - rose to a seasonally adjusted 54.2, from 53.2 in September. The index rose for the fourth month in a row and remained above the 50 figure that indicates no change on the previous month.

New orders (57) and new exports (54.1) increased. The recent rapid growth in new business - largely from the US, but also reported in Germany, Republic of Ireland and the Far East - pushed the output index to 59, its highest reading in seven years. Some businesses in the survey said customers were rebuilding inventories as they became more confident about the economy.

Purchasing activity rocketed to 58.6, as UK companies sought to meet demand, but they cut back stocks of finished goods, stocks of purchases, and employment.

Input price inflation was the fastest (52.9) since April, thanks to demand for raw materials and supply shortages. Oil, metal, plastic and chemical prices were singled out by companies. They also enabled a small majority of companies (5.8 per cent to 5.7 per cent) to increase increase input charges (index of 50.1).

In the euro-zone, the manufacturing PMI rose to 51.3 in October. The big three economies - Italy, Germany and France - recorded respective PMIs of 51.8, 51.2 and 51, and all enjoyed rises in output. The fastest growth in new orders was in Austria, followed by the Netherlands and Germany.

And in the US, the Institute for Supply Management's (ISM) manufacturing report on business for October put the PMI at 57. Accelerating growth in new orders, export orders and production have helped US manufacturers to recover after their sector contracted in the first half of 2003.

* More information on the UK and euro-zone PMIs is available at www.ntc-research.com. The full text of the ISM reports on the US economy for October, and previous reports, is available at http://www.ism.ws/ISMReport/index.cfm.