THE scale of the slowdown hitting manufacturing and service sector firms is showing signs of easing, according to two new reports.

The Engineering Employer's Federation (EEF) said while manufacturing remained under "intense pressure", there were grounds for optimism with an improvement expected in the second half of the year.

Meanwhile, a report from the Chartered Institute of Purchasing and Supply (CIPS) revealed that the service sector showed its first signs of recovery last month.

The CIPS survey showed growth edged up further from January's level, which had been the first growth seen in the sector since September 11.

Despite its forecasts of an improvement in the fortunes of manufacturing in the second half of the year, the EEF said it was concerned about falling levels of investment which could hit firms attempting to improve their productivity.

It warned that job cuts in the manufacturing sector would continue for the rest of the year.

EEF chief economist Stephen Radley said: "Manufacturers are starting to look forward with a little more optimism, as the recovery in the US and elsewhere feeds through into fuller order books.

"However prices, margins and cashflow remain under intense pressure."