The number of manufacturers in Wales has grown by 3.1% since last year, a new report has shown.
The regional outlook report said Wales now has 5,680 manufacturing firms and 156,000 people employed in the sector - 10.7% of the country's total workforce.
It said business confidence remained high "despite an uncertain political landscape".
The report is based on survey data and Office for National Statistics figures.
It added manufacturing now accounts for 16.8% of the country's total output - the second highest in the UK - with transport, food and drink and metals the largest sectors.
Paul Byard, EEF director for Wales, said: "This is positive news for Wales with our output balance outperforming the rest of the UK again.
"Confidence in the sector in Wales remains high, in spite of a squeeze on particularly domestic budgets, which was the likely cause of some signs of softening at the start of the year."
Paul Falvey, partner and head of manufacturing at BDO in Wales, added: "Wales has been a strong performer over the past year, outperforming other regions in manufacturing output and reporting high levels of confidence and investment intentions."