LONDON (Reuters) - Factory orders fell at their sharpest pace in six months in October, though firms were their most upbeat about future output in more than two years, a survey showed on Tuesday.

A worker operates machinery at the Closed Loop recycling plant in Dagenham east London February 17, 2009. REUTERS/Luke MacGregor

The Confederation of British Industry survey’s total order book balance dropped to -28 this month from -17 in September, its weakest level since April and below economists’ expectations of a reading of -19.

Other components of the survey were mixed. Output expectations spiked to +18 from -12 in September, the highest since March 2008, but the export order books balance dropped to its lowest level since February, to -21 from -5 in September.

The pound fell to session lows against the dollar and the euro after the figures, which reinforced expectations that growth will slow markedly as the year progresses and encourage the Bank of England to keep interest rates at their record low.

Analysts said the fall in the export balance was particularly disappointing given the weakness of the pound, which has lost more than a quarter of its value over the last three years.

“The CBI’s survey adds to the growing weight of evidence suggesting that the overall recovery could fade quite sharply in the months ahead,” said Samuel Tombs of Capital Economics.

The CBI’s quarterly poll of manufacturers published at the same time painted an unclear picture of how the sector is faring.

The quarterly business situation balance dropped to +2 from +10 in July, the lowest in over a year. And firms expected to lay off staff at a faster pace in the next three months than in July.

In addition, profit margins were likely to come under pressure as unit costs were expected to rise, but firms did not think they would be able to raise their prices significantly.

Nonetheless, firms expected to raise output in the next three months, with the balance rising to +18 from +6, and export orders were also seen improving.

“The concern is that manufacturers will see softer growth over the coming months as stock rebuilding winds down, tighter fiscal policy increasingly weighs down on domestic demand, and slower global growth hits foreign demand for U.K. products,” said Howard Archer, economist at IHS Global Insight. (Additional reporting by David Milliken)