Manufacturers in Northern Ireland are suffering from falling output and orderbooks with margins under pressure from rising costs and weakening prices, according to the Confederation of British Industry's (CBI) latest Regional Trends quarterly survey.

Even so, the business community remains more optimistic about prospects in coming months than any other UK region except Wales and "a fairly rapid rise" in total output is expected in the next four months despite weaker order books.

However, export deliveries decreased significantly in the April-July period and are forecast to continue falling in the coming months. "In line with expectations, employment increased rapidly in the last four months despite falling output," says the CBI. "Against the UK trend, employment is expected to rise in the next four months."

Investment intentions remain negative. There have been significant increases in firms citing inadequate net return, demand uncertainty and internal finance shortage as factors limiting capital spending.

"Rapidly falling domestic prices and continuing declines in export prices are leading to tight profit margins," concludes the CBI in its prognosis on the outlook for Northern Ireland manufacturers. "Rising costs expected in the next four months, as well as continuing deflation, will keep a tight grip on margins."