On the back of improving demand and output, optimism among small and medium-sized manufacturers has risen at the fastest pace since the CBI started tracking business sentiment in 1988.

The latest SME Trends Survey shows that total new orders increased in the three months to October for the first time since July 2012, driven by domestic orders which rose at their fastest rate since January 1995.

Export orders have also risen at their fastest rate since April 2011, boosting optimism around export prospects for the next 12 months.

Key findings of the survey:

• 42 per cent of firms reported an increase in total new orders, while 25 per cent said they decreased, giving a balance of +17 per cent, ahead of expectations of modest growth in the previous survey (+9 per cent)
• Output has increased modestly (+8 per cent), beating predictions of staying unchanged in the previous survey (+1 per cent). This is the highest balance since July 2011 and output is predicted to increase further in the next three months (+15 per cent).
• Manufacturers expect demand to strengthen again in the next three months, with robust growth in total new orders (+26 per cent) and domestic orders (+23 per cent).

“This has been a positive quarter for small and medium-sized manufacturers, with new orders and output both on the rise, and further improvements expected next quarter,” says Stephen Gifford, CBI director of economics.

“Optimism about the general business situation has improved at a record pace, and there is evidence of a general thaw in investment intentions for the year ahead.”

Alongside the improvement in demand, the CBI said that output has risen modestly as well, and it is expected to pick up at a faster pace over the next three months, accompanied by a further improvement in orders.

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