Manufacturing orders hit a two-year high in the three months to February, although prices continued to rise.
The latest Industrial Trends Survey from the CBI shows 27 per cent of businesses reported orders were above normal for the time of year, while 19 per cent said they were lower than expected. The resulting eight per cent balance is the highest since February 2015.
Strengthening demand was led by the mechanical engineering and metal products sectors, the CBI said.
Export orders were stable. Nineteen per cent reported orders were higher than expected, while 29 per cent said they were lower.
Overall output was robust, with 35 per cent of firms reporting a rise in volumes over the quarter and 20 per cent reporting a fall.
Output growth is expected to pick up over the next three months, with 43 per cent of companies forecasting a rise and just 10 per cent predicting a fall. The resulting balance of 33 per cent is the highest since September 2013.
Nevertheless, firms expect prices to rise sharply over the coming quarter as Sterling's depreciation continues to increase the cost of raw materials. Some 38 per cent of companies expect to raise prices and only six per cent expect to cut them. The resulting balance of 32 per cent is the highest since April 2011.
Rain Newton-Smith, CBI chief economist, said: "Stronger demand and production is good news for UK manufacturers, though the weaker pound continues to push up input costs and this is now feeding through to output price inflation expectations.
"With cost pressures building, businesses will be looking to the Budget for relief from business rates, specifically bringing forward the adjustment from RPI to CPI.
"Over the longer term, investment in education and innovation as part of the Government's industrial strategy will really need to deliver in the face of increasing political headwinds."