PRICES of goods at the factory gate have reached their lowest level since November last year, figures have shown.

Data from the Office for National Statistics showed manufacturers were absorbing some of the cost of rising raw material prices.

Higher oil prices were largely to blame for raw materials costing 0.5 per cent more last month. But the price passed on to consumers only increased by 0.3 per cent, against 0.5 per cent the previous month.

Other factors contributing to the increase in costs paid by manufacturers were the prices of home-produced food, imported metals and imported parts and equipment.

The 0.5 per cent rise represented a slowdown on the previous month, when costs to manufacturers increased by 2.3 per cent.

Simon Rubinsohn, economist at stockbroker Gerrard's, said the rise in output prices was largely due to tobacco, alcohol and oil products.

Stripping out these areas left a rather more subdued picture, he said.

John Butler, of HSBC bank, said: "Manufacturers do appear to have expanded their margins, but competition in this sector remains intense.

"That should provide a limit on how far their margins can expand without losing market share."