ROME (Reuters) - Italian manufacturing activity grew for the fourth month running in October, a survey showed on Monday, adding to signs that the euro zone's third-largest economy is starting to emerge from a two-year recession.

Still, the pace of expansion in manufacturing eased very slightly as new orders rose only modestly.

The broader recovery could also be undermined by political uncertainty, with conflict between the partners in Enrico Letta's left-right coalition hobbling efforts to reform the economy.

Tensions are running high over a Senate vote due this month on whether to expel centre-right leader Silvio Berlusconi after his tax fraud conviction.

The Markit/ADACI Purchasing Managers Index edged down to 50.7 in October from 50.8 in September, below the average forecast in a Reuters survey of analysts that pointed to a rise to 51.0.

The manufacturing sector accounts for about 19 percent of Italian economic output, according to statistics office ISTAT, and variations in industrial output normally have a close correlation with gross domestic product.

Output expanded for the fifth month in a row in October, the survey showed, and at a faster pace than the month before.

But growth in new orders eased for the second month running, slowing to 50.5 from 50.8 in September, just marginally above the 50 mark that separates growth from contraction.

Italy has posted eight consecutive quarters of economic contraction. In inflation-adjusted terms the economy is now smaller than it was at the end of 2001.

Most analysts expect modest economic growth in the last quarter of 2013, but forecast a decline in output for the whole year of around 1.8 percent, following the 2.4 percent GDP drop in 2012.

The PMI survey showed manufacturers shed jobs in October for the 27th month in a row, though at the slowest rate since February 2012.

Italy's jobless rate climbed to 12.5 percent in September, the highest figure on records dating back to 1977. The youth unemployment rate also hit a new peak of 40.4 percent.

(Reporting By Catherine Hornby; Editing by Hugh Lawson)