Industrial output weakened in the third quarter for the first time since the end of 2004. Describing the performance of manufacturing as "flat", Bloxham stockbroker economist Alan McQuaid said that the food sector was facing particular problems from growing foreign competition. Marc Coleman, Economics Editor, reports.

The Central Statistics Office's (CSO) latest industrial production and turnover figures for September show manufacturing output fell by 0.2 per cent between July and September on a seasonally adjusted basis.

This follows a rise of 5.2 per cent in the second quarter and reflects significant falling output across a range of high-profile sectors.

In the electrical equipment sector, which accounts for over one-fifth of total output, output fell by 1.2 per cent on the year ago period.

In the food and telecommunications sectors, each accounting for 10 per cent of output, the figures fell by 4.5 per cent and 4.3 per cent, respectively.

According to Mr McQuaid, a gap has opened up between the so-called modern and traditional sectors of the economy, with the largely foreign-owned modern sector outperforming the traditional sector.

"Following a strong start to 2006, output growth in the traditional and generally indigenous firms has settled down to more moderate levels", Mr McQuaid said yesterday.

Despite a poor performance in the third quarter, output levels remain significantly higher than last year. Overall manufacturing output was 6.2 per cent higher in September than a year previously. Growth was strong in both the traditional and modern sectors, where annual growth was 5.3 and 6.8 per cent, respectively.

Mr McQuaid predicted that output would grow by "in or around 5 per cent" over the whole of this year and 2007, but was more cautious about developments next year.

"A similar performance can be expected for 2007, although this outcome is subject to more risk, as the possibility of a sharp fall in the dollar remains."