A pick-up in new manufacturing orders revealed by a CBI survey has been hailed as a sign of improved confidence in the economy.
The organisation's latest quarterly industrial trends survey showed optimism among firms regarding the general business situation and export prospects both grew for the second quarter in a row.
Domestic orders recorded the strongest growth in a year while export orders showed the fastest rise in more than two years, although the pace of the improvement was still below earlier expectations.
The rise in confidence was reflected in firms' headcount, which is rising at the fastest rate in a year, the CBI said.
Stephen Gifford, CBI Director of Economics, said: “Manufacturers have seen a pick-up in activity across the board this quarter, with new orders and production continuing to rise.
“Optimism in the sector has risen again, and demand conditions are expected to improve further in the coming three months. The gentle rise in confidence is being reflected in firms’ headcount, which is rising at the fastest rate in a year.
“But manufacturers remain concerned about political and economic conditions abroad limiting export orders, which is likely to reflect heightened uncertainty over the global economic outlook.”
And this concern about export orders has seen investment intentions remain muted.
The survey of 390 firms found that 32 per cent of respondents reported an increase in total new orders and 27 per cent said they decreased, giving a balance of plus 5 per cent – the highest since April last year.
Samuel Tombs, UK economist at Capital Economics, said: "For now, then, more good news. But with demand for exports weak in the UK's largest market, the Eurozone, and domestic consumers' real pay still being squeezed, it is hard to see how the manufacturing sector's recovery can gather much more pace in the near term."