Manufacturers showed modest growth last month with exports benefiting from the weakness of the pound against the dollar.

A monthly survey carried out by the Chartered Institute of Purchasing and Supply (CIPS) showed the UK manufacturing economy strengthening slightly for the 16th month running.

The CIPS purchasing managers index, based on a range of questions to manufacturers, registered 51.7 in August, against 52.0 in July.

Any number above 50 in the index indicates growth while a number below 50 shows the sector is contracting.

Manufacturers' order books and output increased for the 17th consecutive month.

Output expanded during August at the fastest rate since March, with growth primarily driven by strengthening demand.

The CIPS output index recorded 52.5, compared with 52.0 in July.

Manufacturers continued to blame the strength of the pound against the euro for lost sales in Europe but the fall of the pound against the US dollar benefited exporters, with export order books growing, said CIPS.

But CIPS added the domestic market continued to be the main source of business for manufacturers and, despite the increasing pace of growth, expansion of output remained slower than that seen in the second half of 1999.

While exporters benefited from the weak pound, the strong dollar also meant higher prices for goods being imported.

Neil Parker, senior economist at Royal Bank of Scotland, said exporters to the US and Japan particularly were benefiting from the strength of the dollar.

But the figures did not change his forecast that the Bank of England's Monetary Policy Committee would keep interest rates on hold at six per cent when it meets next week.