Industrial production is growing at its fastest rate since 2003, according to figures released yesterday by the Central Statistics Office (CSO).

The volume of industrial output in the three-month period to June 2006 rose by 6.4 per cent, representing the highest rate of growth since the last quarter of 2003.

This improvement was driven by a strong performance in the "modern" sector - comprised mainly of foreign-owned high technology and chemical industries - which grew by 5.4 per cent year-on-year in the second quarter.

The "traditional" sector, which includes indigenous food and beverage industrial production, did not fare as well, with annual growth dipping by 0.1 per cent in the second quarter.

However, output in this sector was up 3.3 per cent in the first half of the year compared to the same period in 2005.

According to Alan McQuaid, chief economist of stockbroking firm Bloxham, the increase in industrial output so far this year is encouraging.

This is based on the fact that it is "more broadly based" than growth experienced in 2005, and not limited to foreign-owned companies.

Mr McQuaid is optimistic about future growth levels in industrial output, commenting that "the output of the manufacturing sector should grow broadly in line with the economy's overall potential growth rate, in or around 5 per cent.

"A similar output can be expected for 2007."

This positive sentiment was echoed by Dermot O'Leary, chief economist with Goodbody Stockbrokers, who said that "industry should still contribute to growth in the Irish economy in 2006".