SCOTTISH manufacturers suffered a fifth consecutive quarterly fall in total new order volumes in the three months to July, but achieved renewed growth in output after a nine-month period of decline, a key survey shows.

The survey, published yesterday by the Confederation of British Industry in Scotland, highlights tough conditions for manufacturers in the Scottish and wider UK market.

It also shows employment in Scottish manufacturing broadly stagnated in the three months to July, a situation which has now prevailed for a year on the basis of the CBI's survey. And Scottish manufacturers predict a slight fall in employment in the coming three months.

However, the survey shows an acceleration in growth of new export orders for the Scottish manufacturers in the three months to July.

Subtracting the percentage of Scottish manufacturers enjoying a rise in total new orders in the three months to July from that suffering a fall, a net 11% recorded a drop. Manufacturers had, in the previous quarterly survey, voiced expectations of renewed growth in total new orders in the three months to July but these hopes failed to materialise.

Iain McMillan, director of CBI Scotland, said: "The orders situation was disappointing. What is happening here, we believe, is, while the UK and the Scottish economies are going through a recovery phase, the recovery is not yet strong enough to lift these values into positive territory."

Highlighting the significant extent to which earnings growth was lagging inflation, Mr McMillan said: "Spending power is still pretty low and that is having an effect on domestic consumption, and hence into domestic manufacturing."

Scottish manufacturers forecast marginal growth in total new orders in the coming three months.

In the three months to July, a net 19% of Scottish manufacturers suffered a fall in new orders from within the UK. This signalled a slower rate of decline than the balance of 36% reporting a fall in domestic new orders in the previous quarterly survey, but nevertheless pointed to a sharp decline.

A net 5% of Scottish manufacturers predicted a further fall in domestic new orders in the coming three months.

The weak domestic order situation was in contrast to Scottish manufacturers' performance in export markets in the three months to July, with a net 15% reporting a rise in overseas orders in spite of challenging conditions in eurozone markets.

This was a significant improvement on the balance of 3% reporting a rise in export orders in the three months to April.

A net 11% of Scottish manufacturers reported a rise in output volumes in the three months to July. This was a marked improvement on the previous quarter, with a net 23% of Scottish manufacturers having reported a fall in output volumes in the three months to April. And a net 15% of manufacturers predicted a rise in output in the coming three months.

A spokeswoman for CBI Scotland cited food and drink, including the Scotch whisky industry, and chemicals as the sub-sectors which had enjoyed the strongest performances during the three months to July.

CBI Scotland's latest industrial trends survey shows the first rise in optimism among manufacturers since last October. A net 8% of Scottish manufacturers said they were more optimistic about the business situation than three months earlier.

A net 5% of respondents, however, forecast a fall in numbers employed in the coming three months.

Mr McMillan said: "These results show increased optimism and a continuing trend of exports from Scotland performing fairly well. However, manufacturing industry in Scotland still faces a difficult economic environment in home markets, although the survey suggests that the situation may be improving."

The survey shows Scottish manufacturers expect to reduce sharply capital expenditure on buildings and plant and machinery in the coming year, compared with the previous 12 months. A net 33% forecast a fall in expenditure on buildings, and a balance of 32% predicted a drop in spending on plant and machinery.

A net 19% of respondents forecast spending on product and process innovation would be greater in the coming year than in the previous 12 months. A net 7% forecast greater spending on training.