Insider Media Limited

The UK's manufacturing sector has recorded its strongest performance for 16 years. The boost, which has been driven by strong orders from overseas, was described as “incredibly positive” by the Midlands head of manufacturing at Barclays Corporate, Ray O’Donoghue.

The Chartered Institute of Purchasing & Supply's (CIPS) activity index indicates growth when it records a reading of more than 50. This jumped to 58.3 in December - up from 57.5 in November.

O'Donoghue said: "An incredibly positive set of December PMI figures underscores the fact manufacturing continues to outperform the general UK economy, which Barclays economists now expect to grow by 2 per cent in 2011 and 2.1 per cent in 2012.

"In terms of demand for the UK's manufactured goods, a strengthening in household consumption, net trade and investment should offset the fall in public sector demand. Business investment certainly has the potential to grow in 2011, as non-financial firms in the UK have been running substantial cash surpluses in recent quarters.”

However, there are fears of more price rises as input costs rose at their fastest rate in the 19 years that figures have been recorded. The highest rises were reported in the textiles, clothing, food, drink, chemicals and plastics sectors.

Leading economists have said the boost in manufacturing could provide a positive spark to leading economic recovery in the final quarter. But there are warnings that input cost rises, caused by strong demand and rising energy costs, are a bad sign for consumers.

This could place pressure on the Bank of England to raise its base rate from 0.5 per cent, experts have said.