The recession-hit manufacturing sector has sounded a rare note of good news after a survey showed that output volumes are expected to stabilise over the coming months.

According to the CBI's monthly industrial trends survey for February, 28 per cent of manufacturers said they expected output volumes to be up over the next four months.

Of those questioned, 27 per cent still said output volumes would fall, but the balance of plus one per cent is the first positive balance since July 2001.

It also marks a significant recovery from December's three-year low of minus 28 per cent.

CBI head of economic analysis Doug Godden said: "In the survey we appear to be seeing the first signs that the severe squeeze on manufacturing is starting to ease."

But he also warned: "It would be wrong to overstate the good news. While this is the first time since last summer that manufacturers have not been expecting a fall in output, they are not expecting an increase either.

"Order books are still well below normal and both profit margins and prices are still under severe pressure."

But the CBI's economic forecast, also published yesterday, said the prospects for the UK economy were improving.

It expected the annual growth rate to slow to 1.8 per cent in 2002 compared to 2.4 per cent last year, but the economy was expected to recover as the year went on.

Growth was forecast to pick up to 2.7 per cent in 2003.

Of the 1,078 manufacturers interviewed for the monthly trends survey, those in the aerospace sector said they still anticipated a sharp fall in output volumes over the coming months.

But those in the food, drink, tobacco and motor vehicle industries forecast a rise. The survey also showed that total order books were "significantly below" normal but had risen to levels last seen before September 11.

The balance was minus 29 per cent, an improvement on the minus 31 per cent seen last month and the minus 34 per cent recorded in December.