RTTNews - Confidence is returning across the manufacturing sector in the EU, but sentiment remains much weaker than pre-crisis levels, the latest KPMG Business Outlook Survey revealed Monday.

According to the survey conducted among over 3,700 manufacturing firms across the EU, the net balance for activity rose to 28 from minus 10.2, to indicate expected growth of manufacturing production by mid-2010. Revenues are also expected to rise, albeit to a lesser extent than new order volumes.

The survey found manufacturing sentiment is strongest in the U.K. and in Italy. Activity is set to drop in Greece and, to a lesser extent, in the Czech Republic.

Input price inflation is forecast to strengthen, albeit only modestly. Meanwhile, output price inflation is expected to soften over the next twelve months reflecting intense competitive pressures.

Moreover, the survey found EU manufacturers expect to continue cutting staffing levels in the next twelve months, with France and the Netherlands showing the most severe job cuts. Companies across the manufacturing sector expect to make further cuts to investment.

Before getting too carried away with talk of recovery, let us not forget that we are still firmly rooted near the bottom of the economic cycle, said Alan Buckle, Global Head of Advisory at KPMG.

Since only the U.K. shows optimism on recruitment and there are more cuts signaled in investment, Buckle said there is still some way to go on the road to full recovery.

Also on Monday, another survey on business outlook for Brazil, Russia, India and China, conducted by KPMG, showed a strong and broad-based rebound in sentiment following the drop seen in the aftermath of the financial crisis.

July's confidence balances show sharp improvements from the winter survey and, in many cases, have returned to levels broadly in line with 2008 readings, KPMG said.

According to the survey, confidence is highest in Brazil, while firms in Russia and China also predict robust rates of expansion. While Indian firms are much less upbeat than their counterparts elsewhere, confidence has still shown a clear improvement from January's depressed level.

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