British industry is busier than at any time since 1998 as a pick-up in export orders offsets a slight fall in demand from the home market.
But the latest quarterly Industrial Trends survey from the CBI shows industrialists a little less confident about the general business situation than they were three months ago. And the number planning to step up their output in the coming months comfortably exceeds those expecting a fall.
While the picture remains mixed, Ian McCafferty, the CBI's chief economic adviser, contrasted it with the relative gloom last year.
"Manufacturing has been picking up in the first half of this year along with the economy," he said. "The glass is certainly as much half full as it is half empty".
Only half the companies taking part in the survey said they were working below capacity, a level last seen in 1998 and down from 56 per cent in the CBI's April survey and 62 per cent in January.
Despite this, investment intentions are only slightly better than last year.
Companies planning to hold back their spending on plant and machinery outnumber those looking top increase them by ten per cent, little changed from April. In July last year this negative balance was 15 per cent.
Mr McCafferty said companies he had visited recently have three reasons for this lack of investment in an improving economic climate for manufacturing. n It has been impossible to pass fast-rising costs of fuel and raw materials on to customers. Industry's margins are under pressure. * The financial rate of return that can be expected from an investment is not sufficiently attractive, and * Cash is being drained off the fund pension scheme deficits.
There is also a possibility that British companies are investing overseas rather than expand or update their capacity at home, Mr McCafferty added.
He doubted, though, that there was any risk of a squeeze on capacity overall. "I don't think we are anywhere close to hitting the buffers," he commented. "After a long spell of over-capacity they are now using more of it."
There is also no sign of any shortage of skilled labour as a constraint on output, or the prospect of rising output stopping the loss of jobs in industry.
The CBI estimates that 25,000 manufacturing jobs were lost in the second quarter of this year - in line with the long-term average, a number likely to fall back only marginally to 23,000 in the three months to September.
A positive balance of 14 per cent of the companies taking part in the survey expect to crank up their output in the coming three months - against five per cent who actually did so in the past three months.
Mr McCafferty linked this to a sharp fall in stocks of finished goods over the first half of this year. The balance of companies describing their stocks are more than adequate to meet demand has now fallen back to five per cent from 19 per cent in January.
This, he suggested, indicated that rising export deliveries had come to some extent from stocks. From now on they will have to be met by output.