THE authoritative CBI quarterly survey has confirmed others in finding

that for the first time since the recession began businessmen are

feeling more confident about the future.

But, as David Wigglesworth, chairman of the CBI's Economic Situation

Committee, pointed out, we will only know for sure if this hope is

justified when the increase in business actually shows up in the

statistics.

However, the precedents are encouraging. The survey shows that 19% of

manufacturers are more optimistic than they were four months ago and 17%

less optimistic. The difference or balance between the two measures the

trend and the latest plus 3% compares with minus 26% in July and the

recent low of minus 51% in January.

The latest swing, from minus 26% to plus 3%, is much in line with the

swings which were subsequently shown to mark the end of the two previous

recessions. In 1981 there was a move from minus 27% to plus 8% and in

1976 from minus 18% to plus 10%.

The confidence measure is volatile -- after all businessmen are human

beings with as many swings in mood as anyone else -- and it happened

that actual demand turned out to be much lower than they had forecast in

the last survey in July. But the match with past patterns is telling.

However, it is worth bearing in mind that in the last recession gross

domestic product started to recover in 1981 although it was not until

1983 that manufacturing output started to rise.

Statistics will no doubt show the economy coming off the bottom in the

second half of 1991, as the Chancellor forecast in the Budget, but it

will be many months yet before the man in the street notices. Mr

Wigglesworth talked of a slow increase in well-being next year. The

problem for the Government is whether any improvement in the ''feel

good'' factor will come through in time for the election.

Now the downward trend in new orders is expected to come to an end in

the next four months, with a balance of 2% of firms looking for a small

improvement. A similar proportion is looking for a rise in output. It is

the first time for 18 months that manufacturers have not anticipated a

decline in demand.

But this view is not universal. Large companies, defined as having

over 5000 employees, still see a further drop in demand while smaller

ones are more hopeful, particularly those with between 200 and 500

employees. Also optimism varies between sectors, with capital goods

manufacturers expecting to reduce output further.

As might be expected domestic markets are more depressed than export

markets, and order books for the latter have picked up marginally.

Export optimism has improved for the first time since April 1990. Now

27% of firms are more optimistic about export prospects and 13% less

optimistic. This is certainly encouraging for the balance of payments

but is rather odd considering that the main engine of Europe -- Germany

-- is slowing rapidly.

It is to be hoped that stronger growth in the US economy will take up

the slack next year, though current signals remain unclear. The dire

state of the domestic economy is forcing companies to put more effort

into exports and trends in unit costs are encouraging for UK

competitiveness. They are expected to grow at the lowest rate since July

1986. Productivity has already improved by over 3.5% in the past year

and the CBI survey points towards the trend continuing.

Against this the CBI is concerned about the fall in manufacturing

investment, though this is starting to level off. It will take a long

time for the trend to reverse and only when there are firm signs of

rising demand will companies start investing more -- mere expectation of

an upturn will not be enough. Some 69% of firms are now working below

capacity, a slight fall on July's 71%. Availability of finance is only a

minor factor behind investment decisions, contrary to some observers'

opinion. Working capital pressures are also easing.

Recessions are always exaggerated by manufacturers running down stocks

and this can go on for many months when weak demand means there is

virtually no chance of a sudden upsurge in orders leaving them short of

stock. In the year to June destocking amounted to 2.3% of GDP. The past

four months saw the sharpest cutback in stocks of finished goods since

January 1983 but this is now expected to slow. A similar trend applied

to stocks of raw materials and work-in-progress.

One of the most startling findings of the survey is that the

proportion of firms cutting prices matches that in February 1967 but is

otherwise the most significant since 1959. So profit margins are being

squeezed relentlessly. Firms expect to lose further jobs at a slightly

slower rate in the final quarter of the year, pointing to perhaps 60,000

job losses in manufacturing, against 70,000 in the third quarter.

While sheer necessity has forced companies to cut capital investment

at least they are not falling down on two other traditional failings of

UK industry, training and spending on innovation. In fact, a significant

increase in training expenditure is forecast over the next year, and

innovation is set to absorb more resources following three surveys of

static spending. This was the case for all but the smallest firms having

fewer than 200 employees.