The manufacturing sector contracted worldwide for the first time in over two years last month as incoming new work dried up, but firms still took on more workers, a report showed on Monday.

The Global Manufacturing PMI, compiled by JPMorgan with research and supply organisations, fell in September to 49.9 from 50.2 in August.     

It is the first time since June 2009 that the index has fallen below the 50 mark that divides growth from contraction, after sliding for the last seven months. 

"The signs point to weak growth or possible month-to-month declines in industrial production in the next few months," said David Hensley at JPMorgan 

The new orders index fell to 48.5 last month, down from 49.4, its lowest reading since May 2009 and the third consecutive month it has been below 50.

But firms did take on more workers last month, and at a faster pace than in August, with the employment sub-index rising to 51.3 from the previous month's 51.0.

US factory activity expanded at a faster pace than expected in September as production and hiring increased, data showed earlier, the latest sign of resilience in manufacturing despite faltering economic growth.

But factory activity in Europe and Asia slumped to levels not seen since the depths of the financial crisis as export demand dropped, reinforcing fears of a return to recession.

The index combines survey data from countries including the United States, Japan, Germany, France, Britain, China and Russia. - Reuters