HOPES of a manufacturing revival have been hit after a CBI survey revealed order books were at a six-month low.

The CBI's industrial trends survey of almost 1,000 manufacturers found order books at a six-month low as tough trading conditions and rising oil prices hit demand.

The ailing sector's stuttering recovery contrasted sharply with the continuing positive showing in the service sector.

Providing further evidence of Britain's two-speed economy, the Office for National Statistics said retail sales were up 0.6 per cent in August.

The figure effectively rules out a cut in interest rates next month, although the Bank of England is set to remain on its guard against a marked deterioration in conditions for manufacturers.

The study conducted in the three weeks to September 11 reported that 40 per cent of manufacturers said that total orders were below normal, while 11 per cent said they were above. The balance of minus 29 per cent compares with minus 24 per cent in August.

CBI regional director Steve Rankin said: "Industry in the region is bumping along the bottom. It is a long slow grind. Profits and employment are being squeezed, although there are some very early signs of a weak recovery."

Rolf McCullagh, director of Middlesbrough engineering group MMC, said its wide portfolio of products gave it an advantage over competitors with a limited customer base.

It was bucking the trend and had recorded "positive growth" in the past six months.

Orders for design and build arm MMC Modular Systems, which manufactures solutions for the NHS and private healthcare trusts, were at a steady level, he said.

Falling demand and rising stock levels have also caused manufacturers to scale back their output projections for the next four months, the study said.

Companies producing capital goods, such as factory equipment, recorded much weaker demand than those offering consumer products and providing components such as textiles and plastics.

CBI chief economic advisor Ian McCafferty said: ''Domestic demand has faltered and modest expectations of short-term recovery have been cut back for the second time this year."