Over two thirds (68 per cent) of surveyed manufacturers expect business activity to increase, leading to the highest positive balance (60.4 per cent) since the survey began in 2002.
And morale in the service sector is also improving, the report showed. Companies in the UK’s largest sector anticipate the strongest expansion of business activity since April 2007.
“UK business now appears to be preparing itself for growth,” said KPMG’s Malcolm Edge. “Although recovery is by no means yet assured, there are enough positive signs to mean that businesses need to be planning for better times.”
Employment expectations in the service sector are also on the up, rising to the highest survey balance (+23.2 per cent) since April 2007.
While positive data from British manufacturers has become a common narrative of the economic recovery, service sector optimism was “more surprising,” said Chris Williamson of Markit, which compiled the data.
“The survey therefore suggests that a reasonable pace of economic growth should be sustained in 2011, with increased private sector hiring offsetting some of the looming public sector job cuts,” he added.
However, inflationary pressures will increasingly be passed onto consumers, the report suggested.
Manufacturers forecast the sharpest rate of factory gate price inflation since the start of the survey. Input price expectations also hit a record high, with a positive balance of 67.8 per cent of respondents anticipating more price hikes.