British exports leapt by much more than expected in February as the weaker pound made UK goods more attractive to overseas buyers.

The increase emerged as separate data showed the first retreat in factory gate prices in 20 months during March after crude oil prices plummeted.

According to the Office for National Statistics (ONS), exports to non-EU countries jumped by 13 per cent during February, while imports fell 5.7

per cent, narrowing the non-EU trade gap to £3.964 billion from £5.631 billion in January. Analysts had predicted the gap to narrow to £5.35 billion.

The overall goods trade gap shrank to £7.315 billion from £7.821 billion in January.

Sterling fell by 25 per cent in 2008 and hit a 23-year low of $1.35 in January before staging a small recovery. It fell to a session low of $1.4638 following the release of the data, having earlier risen as high as $1.4779.

But analysts said that the slightly more positive data on exports and figures suggesting that further falls in inflation were on the cards, were not likely to be enough to change the Bank of England Monetary Policy Committee's widely expected decision today to keep rates on hold at 0.5 per cent and continue with the scheme of quantitative easing or "printing money".

Colin Ellis, European Economist at Daiwa, said that while the weaker pound may be giving a fillip to exports, the figures "do not prove that overseas demand for UK products is now on an upward trend".

Separate data from the ONS showed that the price of goods leaving UK factories ticked up by 0.1 per cent during March, but annual producer price inflation retreated to 2 per cent in March from 3 per cent in February, while core inflation, which strips out the volatile cost of food, tobacco and fuel, dropped to 3.3 per cent from 3.7 per cent year on year.

The cost of raw materials also fell for the first time year-on-year, dropping by 0.4 per cent, although they ticked up by a bigger-than-expected 1 per cent during the month, according to the ONS. Economists said further price falls were on the cards.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "We suspect that many manufacturers will have to cut their prices over the coming months to compete in a very depressed environment."

"Today's data suggests that the MPC's previously sanguine outlook for CPI inflation - where it appears positive throughout the next three years - is looking ever more under threat," Mr Ellis said.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive