JAKARTA (REUTERS) - Indonesia's manufacturing activity climbed to a four-month high in October, driven by strong expansion in production and the first increase in new orders since June, an HSBC Markit purchasing managers' index (PMI) survey showed on Friday.

The index for South-east Asia's biggest economy rose to 50.9 from 50.2 in September. A survey reading above 50.0 signals expansion and one below that means contraction in manufacturing activity.

"The moderate improvement in manufacturing conditions in October appears to have resulted from stronger domestic rather than external demand, as new export orders were very weak," said Su Sian Lim, economist at HSBC.

Foreign demand for Indonesian manufactured goods remained weak with export orders declining for the fifth consecutive month. The rate of the contraction was the most pronounced since July 2012, the report said.

Surveyed firms reported higher input prices on imported raw material costs due to a fall in the value of the rupiah, resulting in a sharp increase in factory gate prices.

"Although slower than September's record, the rate of cost inflation remained sharp and above the series average," the report said.

Employment levels fell for the third month in October as firms were reluctant to hire replacements.