Manufacturers staged a modest comeback last month after their weakest growth in 19 months in February.
Manufacturing production rose for the 22nd successive month in March, although the expansion rate was only slightly up from last month's recent low, according to the Chartered Institute of Purchasing & Supply.
The CIPS's key activity barometer recorded a mark of 52 last month, just ahead of the 51.8 in February, with any figure above 50 indicating growth. A further improvement in domestic demand conditions led to a 24th month of expansion in total new orders, the CIPS said.
However, new export orders showed a further decline as the current strength of sterling against the US dollar reduced UK firms' competitiveness in dollar-denominated markets.
Employment in the sector rose for the first time in four months, with firms reporting that an expansion in workforce levels had been necessary to maintain growth in production.
The seasonally adjusted Employment Index rose to 51.4, its highest reading since last October, although the CIPS said that only indicated marginal jobs expansion as a number of cost conscious firms postponed raising capacity.
Inflation of factory gate prices eased to a 15-month low as the seasonally adjusted output prices index recorded 50.9.
Manufacturers said strong competition meant only part of the increase in their costs could be passed to clients in the form of higher charges.
High oil, steel, energy, plastics and packaging costs led to a further considerable increase in the average prices paid for raw materials by UK manufacturers. CIPS' director of professional practice Roy Ayliffe said: "Purchasing managers saw a slight improvement in operating conditions in the manufacturing sector in March, causing growth in employment to reach its highest level since last October.
"Despite this, rising input costs continued to exert pressure on manufacturers during the month, even though inflation eased to its slowest since April 2004." UK Economist at RBS Financial Markets Ross Walker said any improvement in the manufacturing PMI survey in March was genuinely impressive, given the surge in crude oil prices since mid-February.
But he added: "Still, in the absence of future gains in the key output and new orders sub-indices, the PMI looks a little vulnerable in the short term, given the sharp rise in crude oil costs."