Scotland's engineering sector is "buoyant" despite a small drop in orders from the previous quarter, according to Scottish Engineering.
UK orders were still healthy, according to its latest survey and more companies said they had increased their staffing levels than had seen them fall.
However, export orders were slightly down and overall output volumes also saw a small decline while remaining positive.
Meanwhile, optimism increased. One reason for this has been the creation of formal links between industry and graduates, according to Scottish Engineering.
Bryan Buchan, the organisation's chief executive, said: "While we continue to see improvements on the whole, there are still areas where our member companies are finding that trading conditions are tough.
"Fabricators and metal manufacturers in particular are seeing order levels drop.
"One area where I am very encouraged is in the collaborative efforts of the universities and colleges with industry.
"The Strathclyde Engineering Academy that was launched recently by the Education Secretary Michael Russell will hopefully bear fruit in providing companies with industry-ready graduates."