The Q2 2009 results show welcome progress but also highlight serious risks. Most critical national balances improved in Q2, for both manufacturing and services, but almost all the key balances remain in negative territory, and most balances are still weak by historical standards. The manufacturing balances recorded stronger improvements in Q2 than those of the service sector, but, in absolute terms, the
manufacturing balances are still weaker overall.

The most positive feature of the Q2 survey is the marked strengthening of all the confidence balances, albeit after exceptionally sharp declines in the previous two quarters. Confidence levels are still weak by historical standards, and the recent improvement can only be sustained if the economy continues to stabilise and the recession ends. With cashflow, capacity utilisation, and price pressures remaining weak, it is important that the short-term policy stance continues to be expansionary.