Activity in the Republic's industrial sector slowed more than had been expected in the final quarter of 2002, according to revised figures released by the Central Statistics Office (CSO) yesterday.

The seasonally adjusted numbers show that production levels dropped by 1.7 per cent in the three months to end-December compared to the same period in 2001.

The CSO had estimated a 1.2 per cent decline earlier this month.

Taken as a whole, industrial companies saw output increase by 8.5 per cent in 2002 - the lowest annual rate of growth since 1996 and following five years of double-digit expansion.

Detailed figures show that the majority of industrial sectors experienced lower levels of output in December than in the same month of 2001.

A notable exception was among chemical companies, which saw production levels grow by 22.4 per cent.

The CSO's industrial production series has been somewhat discredited over recent weeks as economists have highlighted the skewing influence of transfer pricing policies employed by multinational pharmaceutical companies.

Mr David Croughan, chief economist at employers' lobby IBEC, said yesterday that the "apparently reasonable numbers disguised a number of more adverse developments", particularly in the second half of the year.

"Even the buoyant chemicals sector fell back 15 per cent in the latter part of the year," Mr Croughan said. "All the weaker sectors remained in the doldrums."

The latest IBEC/ESRI survey on manufacturing, undertaken in January, indicates that activity will not be boosted in the near term as order books remain poor, Mr Croughan said.