Producer prices - the prices of goods that leave the factory gate - rose by only 0.1% in May, giving an annual rate of 0.9%.

The output price index - excluding seasonal items like food and petrol - was unchanged in the year to May, the lowest increase in 30 years.

Prices fell for the year for computers, electronic goods, and some foods.

But the prices of raw materials increased on a seasonally adjusted basis by 0.3% in the month, a surprising jump that was blamed on weaker sterling and higher oil prices.

City expectations were for a fall of 0.1%. But the year-on-year rate was still down 8.9%.

'Rate hike unnecessary'

But most economists dismissed the rise and said that the data showed that the manufacturing sector was still weak.

"These figures will make the mystery behind last week's rate rise even deeper," commented Ian Williams of Panmure Gordon. "They suggest UK manufacturing is in a hole."

The inability to increase output prices in line with raw material prices showed that consumer demand was weakening, according to some city analysts.

"The PPI data are generally benign despite a small increase in input prices. Last Thursday's rate hike will turn out to be unnecessary." said Neil Parker of the Royal Bank of Scotland.