LONDON,(Reuters) - British manufacturers have reported their strongest order books in nearly two years but they also plan to push up their prices sharply in early 2017 after this year's Brexit hit to sterling, a survey showed on Friday.

The Confederation of British Industry's monthly industrial orders balance improved to 0 in December from -3 in November, its highest level in 20 months. Economists polled by Reuters had expected a decline to -5.

Britain's economy has defied expectations of a sharp slowdown following June's vote to leave the European Union and forecasters, including those at the Bank of England, have raised their predictions for growth next year.

"It’s good to see our manufacturers ending the year on a high note with growth in production the strongest since summer 2014 and total orders still robust," Rain Newton-Smith, the CBI's chief economist, said.


"But the weakness of sterling is pushing up the cost of imports, and our survey shows strong signs of this feeding through to higher factory gate prices," she said.

The CBI survey's reading of prices that manufacturers expect to charge in the next three months jumped to +26 from +19 in November, the highest level since June 2011.

The BoE has predicted that inflation will hit a peak of 2.8 percent in the first half of 2018, up from its most recent reading of 1.2 percent.

The CBI's measure of export orders fell for a second month to -15 from -11 and expectations for overall output over the next three months eased slightly to +21 from +24.

(Reporting by William Schomberg; editing by Costas Pitas)

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