Goods manufactured in the UK fetched slightly higher prices in May.

The Office for National Statistics (ONS) said the price of goods leaving factory gates rose by 0.3% in May compared with April.

But the annual rate fell to just 0.1%.

Prices were nudged higher by increases in tobacco, petroleum and other manufactured goods prices, mainly concrete, the ONS said.

Cheaper oil

The figures were slightly stronger than financial markets had been expecting.

The climate for manufacturing is slowly improving

Geoff Dicks Royal Bank of Scotland

But analysts not believe they will lead to a hike in interest rates because price inflation for factory output has been close to zero for several years.

And crude oil prices, which are a key component of goods price inflation, have been declining in recent weeks.

The ONS said crude oil prices fell 1.2% last month from April, the first monthly fall since December 2001.

Volatile

Oil prices on world markets have slipped back below $24 a barrel from more than $27 a barrel just three months ago.

That was enough to drag down input prices, or the cost of raw materials, by 0.7% compared with April - the biggest monthly fall since last November.

Input prices were 6.1% lower compared with a year ago, the best performance since February.

But if volatile elements such as oil, are stripped out, then "core input prices" actually rose by 0.2% in May over the month and 0.5% over the year.

Geoff Dicks, an economist at the Royal Bank of Scotland said: "Overall a 16-month high on core output price inflation tells us that the climate for manufacturing is slowly improving.

Industrial production figures on Tuesday "will tell us whether higher prices are substituting for, or complementary to, higher output," he added.