The UK factory orders rose to a three-year high in March as strengthening domestic demand boosted manufacturing output in the country.

Manufacturers’ total order book balance in Britain rose to +5 in March from -8 in February, the Confederation of British Industry (CBI) survey showed on Tuesday. Markets had expected the order book balance to rise slightly to -6 in March.

“The manufacturing recovery is picking up pace, with firms predicting robust output growth over the next quarter. Total order books have strengthened further this month, and were above normal for the first time in three years, as a firming of domestic demand adds to the healthy export outlook,” said Ian McCafferty, chief economic advisor at CBI.

Also, firms’ expectations on the manufacturing output in the coming months rose sharply, with the corresponding balance increasing to +27 in March, the strongest since February 2007.

However, export order books weakened slightly, with the balance dropping to +5 in March from +11 in February. Further, inflationary pressures remained very intense for UK manufacturers in the March survey, as a balance of 33 percent of firms expect to raise output prices over the coming quarter.

“However inflationary pressures in the manufacturing sector remain very acute, as firms look to pass on sharply increased raw material costs. Price expectations for the coming quarter now broadly match their last peak in summer 2008,” McCafferty said.

The annual consumer price index (CPI) in the UK rose to 4.4 percent in February compared with 4 percent in the previous month, the Office for National Statistics said on Tuesday.

The UK inflation rate in January remained above the Bank of England’s (BoE) target of 2 percent for 15 consecutive months.