PRESSURE for an interest rate cut eased slightly today as a key survey showed the manufacturing sector continued its slow recovery last month.

Despite tough conditions and weak export markets, firms reported an improvement in order books and increased demand across the UK.

The Chartered Institute of Purchas-ing and Supply Managers' key activity index for the sector edged up to 50.5 from 50.3 in September.

On the CIPS scale a figure above 50 signals expansion and the measure has now been in positive territory for three months in a row.

Analysts had expected the overall activity index to slip after last week's CBI report showed that conditions for manufacturers were getting tougher.

CIPS admitted the growth in manufacturers' order books was subdued and there was a "sustained lack" of pricing power given increasing competition.

But it added that the activity index had now been above 50 for seven months out of the past eight and the cost of raw materials was beginning to ease.

Ciaran Barr, economist at Deutsche Bank, said the overall picture painted by the survey was "less encouraging" than the activity index suggested.

He added: "The underlying factors behind the survey are not as robust and we are still a long long way from a sustained recovery."

The Bank of England sets interest rates for November next week and speculation has been rife that rates may come down for the first time in a year.

Minutes from last month's Monetary Policy Committee showed three of the nine members wanted a 0.25 per cent cut given the bleak economic climate.

Mr Barr said a survey on the UK's services sector due before next week's meeting was likely to have more of an impact on the decision.