Manufacturing conditions in the UK improved slightly in December, but the position remains grim.
In its monthly industrial trends survey, the CBI said 37 per cent of firms reported lower than normal order books while 15 per cent saw higher orders.
The resulting net balance of -22 per cent compares with -25 per cent in November.
The latest reading is the best since May and continues the trend of a gradual improvement since the -29 per cent of August.
The overall improvement came despite a worsening in export orders.
Thirty-six per cent of firms said export orders were below normal while 13 per cent said they were above normal, resulting in a net balance of -23 per cent, compared with -13 per cent in November.
Looking ahead to the next three months, the survey found that the proportion of manufacturers expecting a rise in output was stuck at -four per cent for the second month running.
A more positive note in the survey was that as many firms expect to raise prices as to cut them over the next three months. This is better than the deflationary price trends expected since May but worse than a year ago.
Costs are still putting profit margins under pressure, although the 15 per cent cent drop in oil prices since their late August peak should have helped, the CBI said.
Ian McCafferty, CBI chief economic adviser was downbeat on the findings.
"2005 has been an extremely tough year for UK manufacturers and there are few signs of optimism. Weak consumer spending continues to have a negative impact on domestic orders and this month's return to poorer overseas sales reflects the very strong global competition faced by UK exporters," he said.
"A severe winter will only compound issues for manufacturers whose production could be constrained by higher gas prices."
Manufacturers struggled to pass on higher fuel prices last month after separate figures revealed the lowest rate of growth in output prices since April last year.
Although raw material prices rose by more than expected after a pick-up in fuel costs, the amount charged by manufacturers for their goods fell by 0.2 per cent.
National Statistics said this contributed to annual output prices rising by 2.3 per cent in the year to November - the lowest annual rate of increase since April last year.
Experts said the data showed manufacturers' margins appeared to be under "significant" pressure.
Thushani Gajasinghe, economist at the Centre of Economics and Business Research, said the news highlighted the fact that high oil prices were putting a strain on manufacturers.
She said: "With input prices continuing to rise, we may see the effects feeding through into output prices in the coming months.
"We expect that the Bank of England will continue to hold interest rates at their current rate but they will need to keep a close eye on inflation."
A surge in gas prices drove the 1.4 per cent hike in input costs, which contrasted sharply with City expectations for a fall. Gas prices soared by
44.9 per cent between October and November - the largest monthly rise since records began in 1991 - while electricity prices increased by 8.2 per cent. They were slightly offset by a 3.1 per cent fall in crude oil prices.
The lower factory gate prices reflected a drop in fuel prices over the month.
Excluding food, beverages, tobacco and petrol products, core output prices rose by 1.3 per cent in the year to November and lifted 0.1 per cent between October and November.
Economist Allan Monks at JP Morgan said core output price gains remained " relatively modest" despite large increases in input prices.