The quarterly survey, published on the morning of the pre-Budget statement, shows 28% of firms are more optimistic and 19% less optimistic than four months ago. The change of mood reflects expectations of a rise in orders over the next four months. Of those surveyed, 24% expect total orders to go up while 18% anticipate a fall. But total orders fell again over the past four months, although at the slowest rate since April 1998. 34% said total orders fell and 22% said they rose. Exports orders fell more slowly than reported in July, but firms had expected them to level out. Firms anticipate exports will continue falling over the next four months, although at a slower pace. They say the main obstacle is high prices, which reflect the strength of sterling. Output also fell more quickly than expected over the past four months, albeit at the slowest rate since April 1998. But over the next four months manufacturers believe output will rise to meet increasing demand, again for the first time in nearly two years. The number of jobs continued to fall but at the slowest pace since the summer of 1998. SME manufacturers expect fewer job cuts over the next four months, with expectations the least negative since April last year. Both domestic and export prices continued to fall over the past four months, a trend that firms say will continue at a slower pace over the next four months. Prices are falling much faster than unit costs, which suggests a squeeze on profit margins.One worrying finding is the fall in the amount of money that firms plan to invest in plant and machinery over the next year. This is mostly true of small firms - the investment intentions of medium-size companies strengthened for the second consecutive survey.John Alexander, partner at Pannell Kerr Forster, said: 'Medium-size firms are feeling stronger than at any time over the past four and half years. Small firms expect the least improvement but it is still an improvement. So overall life is looking like it might become a little easier for SME manufacturers. They can hope to end the millennium on a positive note, but the big fear is that history will record this as merely the millennium bubble.'
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