Nov. 2 (Bloomberg) -- Europe’s manufacturing industry expanded for the first time in 17 months in October, adding to evidence the region is pulling out of the worst recession in more than six decades.

An index of manufacturing in the 16-nation euro area rose to 50.7 from 49.3 in September, London-based Markit Economics said today, confirming an Oct. 23 estimate for the gauge, which is based on a survey of purchasing managers. The last time the index was above 50, indicating expansion, was in May 2008.

Companies around the world are stepping up output to meet reviving orders after governments committed $2 trillion in stimulus measures to fight the recession. Euro-area confidence in the economic outlook is at the highest since Lehman Brothers Holdings Inc. collapsed, and the International Monetary Fund last month forecast that the global economy will expand next year at a faster pace than previously projected.

“The recession is over and is unlikely to return,” said Julian Callow, chief European economist at Barclays Capital in London. “The economic improvement is coming through in all sectors now.”

Manufacturing in the U.S., the world’s largest economy, expanded at the fastest pace in more than three years last month, data showed today. In China, the euro region’s second- biggest trading partner, after the U.S., a gauge of manufacturing rose to the highest in 18 months.

‘Deepest Downturn’

In Europe, October’s return to expansion among the region’s manufacturers “marked an end to what has been by far the longest and deepest downturn since PMI data were first collected in 1997,” Markit said in today’s report. Overall output showed “the strongest monthly expansion since January of last year.”

The euro-area economy may expand 0.1 percent in the current quarter after growth of 0.2 percent in the three months through September, the European Commission forecast on Sept. 14. The commission will issue updated projections tomorrow.

A composite index of manufacturing and services industries in the euro-area economy rose to 53 from 51.1 in September, Markit said when publishing the first estimates on Oct. 23. That was the highest since December 2007 and above the 51.6 that economists had projected in a Bloomberg survey.

Munich-based Linde AG, the world’s second-biggest maker of industrial gasses, today reported third-quarter earnings that topped analysts’ estimates. Henkel AG, the maker of Persil detergent and Loctite glues, last week unexpectedly reported quarterly operating profit that beat analysts estimates.

The world economy will shrink 1.1 percent this year, the Washington-based IMF forecast on Oct. 1, less than the 1.4 percent it projected in July. In 2010, the economy may expand 3.1 percent instead of a previously forecast 2.5 percent, according to the fund, which helped rescue economies from Hungary to Ukraine during the financial crisis.

To contact the reporter on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net

Last Updated: November 2, 2009 10:24 EST