Manufacturing recovery on track despite inflation

However, the survey by the Confederation of British Industry (CBI) also found that firms have come under intense pressure to pass on rising costs in raw materials, with prices rising at their fastest pace since October 2008.

Ian McCafferty, chief economic adviser at the CBI, said: ’We are seeing some rebalancing of the economy as demand and activity moves away from the drivers of the last cycle — government spending and consumer spending — towards exports and investments. Growth will have to be generated by those two if we’re to see a solid and sustainable recovery.’

Of 394 manufacturers that responded to the CBI’s January Quarterly Industrial Trends Survey, 32 per cent had seen an increase in output over the past three months while 16 per cent said that it had fallen, giving a balance of plus 16 per cent, compared with +9 per cent in the last survey in October.

This was driven primarily by growth in export orders (+13 per cent), with domestic orders rising more modestly (+9 per cent). Asked about expectations for the next three months, firms predicted output to grow at a similar pace based on their order books.