THE cost of goods leaving factories rose at the fastest rate in nine years last month as high energy costs took their toll.

Figures released yesterday by the Office for National Statistics showed core output prices increased by 0.5 per cent between July and August.

This was the largest monthly rise since July 1995 and brought the year-on-year rate to 2.1 per cent.

It came after soaring oil prices pushed the cost of raw materials paid by manufacturers up by 1.6 per cent, slightly higher than analysts expected.

The cost of crude oil has rocketed in recent months as factors such as the violence in Iraq created concerns about supplies.

A 17.8 per cent rise in oil prices between July and August was the largest monthly rise since May 2000 and contributed to a 29.9 per cent rise in the cost of oil in the past year. The impact of this on input prices was partially offset by a fall in the price of home-produced foods, which reflected lower potato and cereal prices caused by increased supplies and strong competition.

Figures also showed that headline output prices, which include food, drink, petrol and tobacco, rose by 0.2 per cent during the past year.

Economist John Butler, of HSBC, said the rise in oil prices would take about six to nine months to have an impact on inflation.

Figures to be released today are expected to show the rate of inflation fell last month.

Mr Butler said the rise in underlying output prices appeared to be led by manufacturers.

He said: "There is now some evidence that inflationary pressure is starting to build in the early parts of the supply chain, apparently led by both cost and demand pressure."