In a sign that the economy has picked up, industrial production increased significantly in August, according to the latest data from the Central Statistics Office (CSO).

When adjusted for seasonal factors, industrial output in the period June to August last was 9.7 per cent higher than the preceding three-month period.

On an annualised basis, industrial output grew by 16.7 per cent in August 2005.

However, in the mainly foreign-owned "modern" sectors growth was 25 per cent, whereas an increase of just 1.5 per cent was recorded in the more indigenous "traditional" sectors of industry.

Performance within the modern sector was in turn dominated by the chemical sector.

"The dominant sector of industry is basic chemicals. It saw production jump by more than 50 per cent year-on-year in August . . . if we strip out basic chemicals and software - where production increased 12 per cent year-on-year in the first eight months - output in the rest of industry was up only 2.5 per cent year-on-year in January-August," said Rossa White of Davy stockbrokers.

The latest industrial performance follows upbeat survey results from the latest NCB stockbroker's Purchasing Managers Index and gives a boost to the Economic and Social Research Institute's (ESRI) latest economic forecasts.

On Tuesday ESRI economist Mr Alan Barrett defended his organisation's forecast of 5.7 per cent growth in Gross Domestic Product (GDP) for 2005.

The Central Statistics Office has calculated that in the first half of 2005 GDP grew at a lower rate of 3 per cent. The relatively poor performance was caused by a downturn in exports from the foreign-owned, high tech, sectors of industry.