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Monday, August 16, 1999 Published at 06:46 GMT 07:46 UK

Business: The Economy

Gloom lifting for manufacturers

Manufacturers are much less gloomy than a year ago

Businesses are less pessimistic about their prospects than they have been for two years, a Confederation of British Industry (CBI) survey has found.

Small and medium-sized manufacturers predicted an end to the recession despite continuing falls in orders and jobs.

And although there is less gloom than there has been in recent months, the overall expectation is for output and sales to fall.

Sudhir Junankar, the CBI's associate director of economic analysis, said: "This survey gives further evidence to encourage the Bank of England to keep interest rates down.

"Although small and medium manufacturers are less pessimistic than they have been for two years - hardly a cause for celebration - demand and output remain weak."

A total of 21% of companies polled in July were less optimistic about the business outlook, while 19% were more optimistic, creating a balance of minus-2%.

Export halt to end

April's survey had showed a balance of minus-8% while last July's survey came in at minus-46%.

Employment fell over the past four months, but not as sharply as reported in the previous quarterly survey.

Total orders continued falling but at a slower pace than shown in previous surveys.

Firms said they expected the fall in demand to ease significantly in the next four months, while the decline in export orders would halt for the first time since January 1997.

There was still no sign of inflation for the companies, with most reporting significant falls in prices.

The CBI carried out the survey with business adviser Pannell Kerr Forster using responses from 796 manufacturers with fewer than 500 workers.

It followed a Taylor Nelson Sofres report on Sunday which showed small businesses reporting a surge in confidence about recovery prospects.

Further clues to the state of the UK economy will come this week when official retail sales figures for July are expected to paint a picture of improved high street sales.

Economists forecast a rise of around 0.5% on the month and 2.7% on the year.

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