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UK manufacturers expect output growth to slow during the latter part of the year, according to new research.

The latest monthly survey of manufacturers by the Confederation of British Industry (CBI) shows that while demand for manufactured goods currently remains high, the impact of five interest rate rises this year is expected to cause a dip in output growth in the coming months.

Of the 644 firms questioned between late July and August, nine per cent more said that their order books were above normal levels than those who said they were not. The balance is the highest reported since 1995, the CBI stressed.

However the business group revealed that there were "marked differences" across the various manufacturing sectors in the UK, with the producers of capital goods such as industrial machinery reporting "brisk" trade.

Of the manufacturers in the capital goods sector, 30 per cent more reported above normal order books than those who said their orders were not above normal levels.

Producers of consumer goods also saw their order books return to "healthy" levels in August, said the CBI, although manufacturers of intermediate goods - such as components and building materials – saw demand slump.

Turning to the future, the balance of manufacturing firms expecting output to increase over the coming months rose, but failed to mirror strong expectations reported between February and June.

Over the five-month period a balance of 22 per cent more firms said they expected output to increase than to decline, but in August the balance was just 13 per cent.

CBI principal economist Lai Wah Co said the figures should be taken by the Bank of England as a sign that a further interest rate rise was not necessary, particularly in light of the current turmoil on the world's financial markets.

Policymakers at the central bank have been concerned that rising input costs could force manufacturers to raise charges for their products, thus fuelling consumer price inflation and adding to pressure for a further interest rate rise.

But with the benchmark interest rate currently at 5.75 per cent after a series of hikes, the CBI stressed that actions already taken by the Bank appeared to be having an effect.

"While price pressures in the manufacturing sector have not gone away, the Bank of England can take some comfort from the expected slowdown in output growth as recent monetary policy appears to be having its desired impact," Ms Co said.