Manufacturers can see a "glimmer of hope" of recovery with order books at the best level for nine months, according to the CBI's monthly industrial trends survey.
The survey shows total orders remain well below normal but less so than at anytime since November 2002. Yet firms do not expect the improvement to push up output over the next three months.
Thirty six per cent of manufacturers said order books were below normal, 12 per cent said they were above. The balance of minus 24 per cent is the least negative since November 2002 and compares with minus 37 per cent in July and minus 27 per cent in June.
Doug Godden, CBI Head of Economic Analysis, said: "Conditions facing manufacturers have proved disappointing throughout this year.
"Overseas, weak markets have prevented exporters from benefiting from sterling's decline. At home, manufacturers seem to have been missing out on the domestic demand generated by consumers and the government.
"This survey provides a glimmer of hope for a revival in fortunes. The big question now is: will this prove another false dawn?"
Firms seeing the biggest improvement were those making goods for direct sale to consumers - like food, drink, pharmaceuticals and electrical goods. These were followed by makers of intermediate goods - such as chemicals, metals or textiles - which are sold on to be made into finished products.
But companies do not believe that improved orders will trigger a rise in output in the immediate future. A balance of minus three per cent suggests output growth will be little different to recent months.
Most firms said stocks of finished goods were adequate or more than adequate to meet demand. Only five per cent said they were less than adequate.
Expectations about prices were broadly the same as in the July survey. Over the next three months manufacturers expect them to go on falling at a similar rate.
The turnaround in orders was due to higher demand at home rather than abroad. Export orders remain just as far below normal this month as last. The balance of minus 32, unchanged from July, is typical of figures seen over the past 12 months.
