Prices declined or rose only slightly, with seven out of 10 companies saying they did not expect to increase their prices.
It was the first time manufacturers in all 11 regions included in the survey, conducted by the Confederation of British Industry and the consultancy Business Strategies since 1988, had been so positive.
Sudhir Junankar, deputy director of economics for the CBI, said: 'It is very encouraging that the regional survey shows recovery all over the country.
'Companies see growth in demand if they keep price rises under control.'
Mr Junankar said that although firms were confident demand would continue to increase, competitive pressure meant they were unsure about price increases. There was therefore still a strong emphasis on cost-cutting and productivity increases.
The regions experiencing the strongest growth were the South- east, East and West Midlands and East Anglia. The South-east and East Anglia, along with Wales, were the regions where manufacturers had the strongest expectations of price rises.
The CBI said firms were investing in plant and machinery when they met production constraints. Inflationary pressures from capacity constraints were modest and there was no need to increase interest rates.
Minutes of the monthly meeting on 6 July between the Chancellor, Kenneth Clarke, and Governor of the Bank of England, Eddie George, confirmed that they had agreed monetary policy should remain unchanged for now.
Mr George said price indicators pointed to inflation remaining low. The recovery was being maintained and was broadly based.
The Chancellor agreed that interest rates 'might have to be raised sooner or later' but that time had not yet been reached.
Some economists were sceptical about the strength of the recovery. Simon Briscoe, an economist at SG Warburg, pointed to figures published yesterday showing that bank lending to industry in the second quarter of the year had fallen and said: 'While borrowing by business is so weak it is hard to see a strong recovery continuing.'Reuse content