OIL prices left their mark on the manufacturing sector last month by helping to drive up the cost of raw materials by 1.6 per cent.

The increase will raise concerns that inflationary pressures are building in the economy and may encourage the Bank of England to raise interest rates more aggressively in future, economists said.

Figures from the Office for National Statistics showed that costs rose by 5.3 per cent over the past year.

This was in line with the expectations of analysts and almost entirely due to the 13.6 per cent rise in oil prices during the past month, amid fears of supply shortages and terrorism.

But they said underlying pressures remained low, with import costs continuing to fall, helped by the high level of sterling and the influx of cheap goods from developing countries.

Manufacturers have also been able to take costs out of their business through cuts in their workforce.

HSBC economist John Butler said there was little sign yet that the higher raw material costs were moving through the supply chain.

At the factory gate, prices were 2.4 per cent higher last month than a year ago and ahead of the 1.8 per cent increase in April.

But, after taking out rises in petrol and goods such as food and tobacco, annual price inflation remained relatively stable at 1.4 per cent last month.