According to the CBI, manufacturers expect production to rise solidly in the next three months on the back of strengthening demand at home and abroad.

The CBI’s latest monthly Industrial Trends Survey revealed that 32 per cent of manufacturers are predicting a rise in output in the coming quarter, and 19 per cent a fall. The resulting balance of +13 per cent is back in line with expectations earlier in the year and an improvement on November’s expectation of a balance of +4 per cent.

Total order books continued to strengthen, with 27 per cent of firms reporting they were above normal in December with 31 per cent below. The resulting rounded balance of -3 per cent is the strongest figure since June 2008 (a balance of +1 per cent) and compares with a balance of -15 per cent in November.

Overseas demand accounted for much of the improvement in total order books. Of the respondents, 25 per cent reported export order books to be above normal, and 21 per cent below, giving a balance of +4 per cent. That is the strongest balance since August 1995 (+7 per cent) and an improvement on November’s balance of -7 per cent.

Inflationary pressures remained intense for UK manufacturers in the December survey, with 27 per cent expecting to raise prices in the next three months and 11 per cent expecting to reduce them. That gives a balance of +16 per cent, compared with +17 per cent in the November survey.

Ian McCafferty, CBI chief economic adviser, said: ‘These figures show that the recovery in the manufacturing sector is well underway. With total order books getting back to normal levels and overseas demand particularly strong, the outlook for UK-manufacturing output growth is encouraging. The past sharp depreciation of Sterling should continue to underpin demand for UK exports into 2011. However, with oil and other commodity prices rising, cost pressures will remain a concern.’

The December 2010 CBI Industrial Trends Survey was conducted between 19 November and 1 December. 430 manufacturing firms replied.