The Bank of England will this week hold a crucial meeting to decide how far to extend the quantitative easing (QE) programme designed to help ward off deflation.

The Monetary Policy Committee is not expected to make any change to the 0.5% interest rate level at its monthly meeting on Thursday.

But the decision on QE will be keenly watched. Second-quarter GDP figures published late last month were so dire — at minus 0.8%, rather than the minus 0.3% forecast — that they led to a flood of calls for Mervyn King, the governor of the Bank, to inject the final £25bn tranche of signed off by the Chancellor.

The signals from the economy continue to be mixed. The rates of decline in both orders and output among the UK's smaller manufacturers are now slowing, the latest quarterly trends survey from the Confederation of British Industry (CBI) will say today.

Although only 17% of companies actually reported rising orders in the three months to July, the resulting balance of minus 34% was nonetheless a massive improvement on the previous quarter's minus 51% — the worst since the survey began in 1988.

Russel Griggs, at the CBI, said: “Business conditions remain difficult for the UK's small and medium-sized manufacturers, but things aren't quite as gloomy as they were three months ago.”

There is a similarly ambivalent picture for the economy as a whole.

Despite last quarter's grim GDP numbers, the UK recession could be over in as little as three months, judging by the latest trends survey from accountants BDO Stoy Hayward.

The index, which measures short-term turnover expectations and order book strength, saw its biggest monthly leap in 13 years in July, and hints as a flat rate of GDP growth in the current quarter.

The number of companies going into administration may also have reached a plateau, says Deloitte.

Corporate bankruptcies shot up by 18% in the first half of the year, although the rate declined by 21% in the second quarter.