Growing domestic demand has pushed total order book levels for manufactured goods to a 12-year high, according to the CBI’s latest monthly Industrial Trends Survey published today.

A balance of four per cent of respondents said their current total order books were "above normal". This is the strongest figure since June 1995, which saw a balance of plus five per cent, and a marked improvement on last month, when a balance of nine per cent said total orders were "below normal".

The higher demand that lifted total order books was seen across all sectors, but was noticeably stronger in consumer goods. Meanwhile, export order books have recovered slightly from January to lie at a balance of one per cent.

To meet the orders, output volumes are expected to increase over the coming three months, with a balance of 28 per cent forecasting growth. This particularly robust result marks the strongest output growth expectation since May 1995's balance of 31 per cent. Output expectations are greatest in the capital and intermediate goods sectors, but also buoyant in the consumer goods industries.

A strong balance of 19 per cent of firms expects domestic prices to rise over the next three months, matching January's figure. Faster price rises are now expected in the consumer goods sector, whilst expectations have dampened in the intermediate sector.

Stock levels have slipped below their long-term average of a balance of 14 per cent, but a balance of nine per cent still considers stocks sufficient to meet expected demand.

Doug Godden, CBI Head of Economic Analysis, said: ‘This is an upbeat survey continuing the trend of manufacturing recovery that started in early 2006.

‘In a climate of strengthening demand, businesses have finally been achieving some price rises and expect to continue doing so, helping to rebuild battered profit margins. Meanwhile export orders are still doing well, despite the strong pound.

‘January's further interest rate rise does not seem to have slowed demand, though it will of course be several months before its effects fully feed through.’