The CBI Survey for September shows that more manufacturers expect output to pick up over the next four months.

Exports remain weak - hit by the high pound

The positive balance of 17% was the best figure for two years - and matched the optimism expressed in last month's survey.

"Manufacturing is coming out of the doldrums with orders continuing to improve, pointing to a manufacturing recovery," said Sudhir Junankar, the CBI's associate director of economics.

Business optimism is widely considered a leading indicator, giving clues to the direction of economic activity in advance of official figures.

Problems remain

Current orders are still weak - with 32% saying orders were depressed, as against 18% saying they were above normal, a negative balance of 14%.

But that is less negative than the figure for August, -22%, and a marked improvement from the negative balance last November of -47%.

And exporters are becoming less pessimistic, although they are still showing a negative balance of -33%, compared to -37% one month ago.

Prices are also continuing to fall, with 23% saying prices are coming down, compared to 10% saying they can raise prices, putting pressure on company profits.

But the CBI says that is good news for inflation, and hopes it will help persuade the Bank of England not to raise interest rates further.

The CBI survey covered 1,032 firms in fifty industries, and was carried out between 26 August and 15 September.