CBI survey offers the glimmer of recovery in industry

Hopes that the UK's manufacturing sector is past the worst of the downturn rose yesterday after the Confederation of British Industry said its members turned positive in June for the first time in four months.

The CBI said that its monthly survey showed that total orders and export sales both fell, but at a slower rate than in May. Looking forward, manufacturers expect order books to rise over the coming months, the first time they have been bullish since March.

Despite a very gloomy statement from the CBI, most economists in the City hailed the report as offering a glimmer of recovery. "This provides the tiniest hint of relief for the beleaguered manufacturing sector," said Daniel Kaye, UK economist at Capital Economics.

The CBI highlighted the fact that firms expect prices to fall at their quickest rate since September 2000. But Sudhir Junankar, associate director of economics, warned: "It is quite possible that manufacturers' hopes could yet prove over-confident."

While economists said the data made a rate cut by the Bank of England less likely, the European Central Bank yesterday left the door open for lower rates.

The ECB decided to keep rates at 4.5 per cent yesterday. But Wim Duisenberg, the bank's president, told a news conference in Dublin, where the ECB was meeting, that it was "not unlikely" that inflation had peaked and would start falling soon.

"All the excesses were due to transitory factors like energy prices, food crises and the depreciation of the euro. We are confident that we'll be below two per cent in 2002," Mr Duisenberg said.

Nigel Anderson, chief euro economist at RBS Financial Markets, said: "I'm becoming a little bit more optimistic that we will get a [ECB] rate cut before the summer recess now."