The UK's manufacturing industry is beginning to show signs of a recovery.

According to the latest Chartered Institute of Purchasing and Supply's (CIPS) Purchasing Managers' Index, production increased at its sharpest rate for 15 months during last month.

The CIPS index, which shows the overall condition of the manufacturing economy, rose to 51.9 in August from 51.1 in July.

A figure over 50 shows an increase in production with anything below indicating a decline.

Despite the increase, both the CBI and the Engineering Employers Federation (EEF) warned that conditions were still tough for manufacturing companies in the region.

Steve Rankin, regional director for the CBI, said: "It is far too early to say that this region has turned the corner.

"The situation is still depressed, but there is a bullishness amongst North-East manufacturers not found in any other region in the UK.

"They are still positive about their future prospects and investment, despite demand still being flat."

Alan Hall, regional director of the EEF, said: "The CIPS survey echoes our own findings, which show that the situation is improving.

"However, traditional manufacturing is still experiencing difficulties.

"Things have improved on a quarter-on-quarter basis, but the region's manufacturing sector isn't out of the doldrums just yet, with some companies still experiencing problems."

The survey showed that volumes of new business continued to grow, with the expansion partly reflecting a return to growth of export orders, which have grown at their sharpest rate for 15 months.

The marked improvements in new business last month was widely reported to reflect a combination of more competitive exchange rates, increased client confidence and improved market conditions.

Production volumes rose for the fourth consecutive month. However, efficient working practices and further gains in productivity allowed some firms to cut jobs.

With firms working to satisfy new orders and existing bookings, the survey indicated that sufficient capacity existed at UK manufacturers to comfortably deal with current workloads.

Backlogs of work were reported to have fallen again, although the pace of decline was the least marked in the four-year series history.

Malcolm Tell, chairman of CIPS' North-East branch said: "The manufacturing industry has seen a continuation of growth in August with some of the highest levels for new orders and production in 15 months.

"Purchasing Managers have been able to strategically utilise inventories in the production process following the higher volumes of output.