The pace of decline in the UK economy is 'clearly easing' but talk of a recovery is premature, according to the British Chambers of Commerce (BCC).
In its latest report, which is based on a survey of more than 5,500 businesses, the business group says that most critical national balances improved between April and June this year.
Balances in the service sector rose in the period, with the BCC saying: "The manufacturing sector's balances improved markedly in Q2. The net balance for home sales rose 18 points to -37 per cent."
The measure used to record the level of manufacturers' home orders also increased sizably, jumping by 15 points. However, levels of activity are still historically low.
Similarly, the export position for the UK economy has improved for manufacturing and remained broadly stable for the services sector. Sales and order overseas performance both improved in Q2 compared to the period between January and March.
One of the brighter spots of Q2 was the clear improvement in business confidence across various sectors of the UK economy. The index that denotes the confidence of businesses in manufacturing improved dramatically, climbing by 40 points into positive territory.
Expectations in the service sector have also risen, with turnover confidence and profitability confidence rising by 19 and 24 points respectively. Both measures are now in positive territory.
However, unemployment levels are still causing real concern to the BCC, which commented: "The worst phase of the recession is over, but serious downward pressures persist across all sectors and regions."
On building on the encouraging figures, the group said: "Confidence levels are still historically weak, and recent improvements can only be sustained if the economy continues to stabilise and the recession ends."
Critical to a sustained recovery is an expansionary outlook, a credible medium term strategy for improving public finance and nurturing wealth creating business, it added.
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