MANUFACTURING continued to grow at its strongest rate for four years last month, according to new figures.

Expansion in the sector equalled that of December, when manufacturers recorded their strongest growth since December 1999, according to the Chartered Institute of Purchasing and Supply (CIPS).

The CIPS Purchasing Managers' Index, which draws together data from a series of separate indices to measure overall activity, reached 56 in December - more than 50 indicates growth.

Output, new orders and employment all grew during the month compared to December, although the pace of expansion in output was slightly slower, and orders and jobs all grew faster.

The index stayed above the no-change level of 50 for the tenth month in succession.

The CIPS said the figures indicated significant improvements in the volume of new domestic business, as well as strength of demand from abroad.

Increased staffing levels were recorded for the second successive month in January.

The seasonally adjusted Employment Index was 51.7, up slightly from 51.6 in December and signalling the first period of consecutive monthly gains in the manufacturing workforce since January 1998.

Roy Ayliffe, of CIPS, said sharp increases in purchasing costs, such as employment and supply shortages, continued to challenge purchasing managers during the month as they acted to protect margins.

"Meanwhile, firms continued to be pushed to meet rising demands driven by the growth levels in the manufacturing economy, on a par with last month's four-year high," Mr Ayliffe said.

Alan Hall, regional director of the Engineering Employers Federation in the North-East, said: "While we are not out of the woods yet, there appears to be some very good news at the moment.

"This survey would appear to mirror our own, published last week, that showed firms in the manufacturing sector are beginning to climb out of the long poor period they have experienced."