Stock levels at British companies are running low in a sign that the economy can expect a boost as inventories are rebuilt, according to data released on Wednesday, although hopes of strong demand remain limited.

Manufacturers expect output to decline at its slowest rate in more than a year for the next quarter, figures from the CBI showed, as low stocks encourage companies to raise production.

“It looks like destocking in the manufacturing sector may be coming to an end, which offers a further sign that the UK economy is starting to stabilise,” said Richard Lambert, director-general of the CBI.

The business lobby re­ported that 32 per cent of manufacturers in August expected output to fall during the next three months, compared with 27 per cent that expected it to rise, giving an overall balance of 5 per cent foreseeing declines in production.

This was the least negative response to the monthly survey since June 2008. Last month, 14 per cent of manufacturers predicted falls in output over the next quarter.

Separately, a Bank of England survey of its regional agents revealed “further widespread reports that the pace of destocking had slowed, as an increasing number of firms had now unwound any excess inventories”. Companies were increasingly looking to restock, the Bank said.

The easing recession in the manufacturing sector adds to signs that the economy has been stabilising.

The Bank’s agents reported that the pace of decline in consumer services had also eased as demand for domestic tourism increased – possibly reflecting the deterrent effect on foreign holidays from the weak pound.

Consumers appeared increasingly tempted by cheaper holidays, with camping and self-catering accommodation doing better than normal.

Also, mid-market retailers were suffering at the hands of no-frills competitors.

Low supply had led to some stabilisation in house prices and “there had been occasional reports of gazumping”, the Bank said.

Meanwhile, in support of other evidence that the pace of rising unemployment has been easing, the survey showed only a minority of companies now plan large-scale redundancies, with some businesses comfortable they had made sufficient cuts.

But there were still dark clouds. The Bank reported that business investment intentions were “very depressed”, driven by the “weak and uncertain outlook for demand”. Many manufacturers described their order books as “short”, a feeling backed up by the CBI survey, which showed new orders still deteriorating at almost the same pace they did in July.

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