THE region's manufacturers will be looking at a sunnier summer period with industry picking up across Europe, a leading economist has predicted.

Jeremy Peat, Royal Bank of Scotland chief economist, said that despite mixed reports on the state of UK manufacturing, better times were on the horizon.

Speaking exclusively to The Northern Echo, he said: "I am expecting improvements in the months ahead.

"There will be real, significant improvements in the global economy - not just a US recovery but an improvement in world growth.

"The indications are that as the year develops, markets in the core of Europe should improve."

North-East manufacturers have enjoyed mixed fortunes in recent months and a number are influenced by the weak dollar.

It was extremely difficult to predict fluctuations in the currency markets, Mr Peat said, but he felt there would be a "period of relief" in the gap between the pound sterling and the US dollar.

He said that there could still be rocky times ahead with the possibility that at some point next year it could widen to as much as two dollars to the pound.

Interest rates are also likely to impact on the shape of the region's economy with Mr Peat predicting a quarter per cent rise in May, August and November. The forecast of 4.75 per cent interest rates by the end of the year will depend on how the public responds to the increases.

"If the Bank of England gets concerned about the consumer side of things, at some stage they may try to get ahead of expectations," he said.

"But a short sharp shock would be damaging for manufacturing."

Mr Peat added that there was a "dichotomy" in the housing market with prices stalling in the south but remaining strong in the North-East.

"The rate of house price inflation will decrease as the year progresses but there is still some fire in the North," he said.