Optimism among manufacturers in the UK has fallen for the first time in two years, a key survey has revealed, as industrial orders and production eased.
A balance of 8% of manufacturers saw new orders increase in the three months to July, an easing in the pace of growth seen in the previous five quarters, the CBI said.
Manufacturers subsequently said they were less optimistic than three months ago - the first drop in sentiment since July 2009.
Economists said the survey indicated UK manufacturing had shifted down a gear and raised fears over total UK growth in the third quarter.
The UK grew by 0.2% between April and June, compared with 0.5% in the previous quarter, the Office for National Statistics revealed yesterday.
Chancellor George Osborne said it was positive that the British economy was continuing to grow and vowed to maintain his course of action to tackle the UK deficit. But a weak manufacturing survey will concern the Chancellor, who has pinned his hopes on the private sector to lead the recovery.
Howard Archer, chief UK and European economist at IHS Global Insight, said the survey results were not "a happy combination for third quarter growth prospects".
He said: "It's evident that manufacturing activity has shifted down a gear as domestic demand is held back by serious headwinds, including tightening fiscal policy."
The survey indicated that over the next three months further easing in activity is expected, with orders expected to be unchanged and production to rise more modestly.