A widely watched industry survey has shown manufacturer's order books unexpectedly improved this month.
The CBI's industrial trends survey showed monthly total order book balance increased to -1 from -10 in July. Economists had expected it to remain stagnant.
Output continued to grow at a steady pace in the three months to August, and this should continue into the next quarter.
Total orders recovered to well above average and export orders also improved in just over half the sectors. At the same time, export orders remained below average in nearly half of the sub-sectors.
Manufacturers also expect average prices to fall in the next three months, after remaining flat last quarter, putting more pressure on margins.
Strong sterling has been both a blessing and a curse for British manufacturers. While it's reduced their input costs, it's made products less competitive in foreign markets. They've also had to contend with a weak recovery in the UK's main trading partner Europe, as well as a slowing Chinese economy.
"While the rebound in manufacturers’ total order books is encouraging, many firms are still struggling in overseas markets," Rain Newton-Smith, CBI director of economics, said.
"On the one hand, the strength of sterling and cheaper energy are reducing factory input costs, but the strong pound is also hitting export prices and margins hard."
"With only four per cent of the UK’s exports going to China, the country’s slowdown is not a direct cause of concern for our manufacturers, but it will make life harder for our firms in exposed sectors like metals and commodities."