The CBI quarterly survey of manufacturing finds 32 per cent of the 394 respondents have seen an increase in output during the past three months, while 16 per cent report that it has fallen: a balance of 16 per cent which is up from 9 per cent recorded in October.

The driving force is export orders. A balance of 13 per cent note a boost in international activity compared with a more modest difference of 9 per cent who experienced increased domestic demand. The survey finds in the next three months, output is expected to grow at a similar pace again, driven primarily by another strong rise in export orders.

But to add to already increasing concern about rising inflation, manufacturers say prices are likely to accelerate sharply as a result of their costs. The survey finds a balance of 31 per cent of manufacturers plan to increase prices for domestic orders, and a higher number, a balance of 34 per cent, expect to hike prices for exports.

Inflation rose to 3.7 per cent in December, up from 3.3 per cent in November, according to the Office for National Statistics.

CBI chief economic adviser Ian McCafferty, comments: ‘The recovery in the manufacturing sector is firmly in place and looks set to continue. Production has been boosted this quarter by a strengthening in both domestic and overseas demand and, over the next three months, companies expect further growth, driven by another rise in export orders.’

McCafferty adds: ‘But manufacturers have come under intense pressure to pass on rising costs: they have increased prices markedly in this quarter, and expect to raise them at an even faster pace over the next three months. This will drive further inflationary pressure in the wider economy.’