DIFFICULT TRADING conditions in the manufacturing sector led to a 3.3 per cent drop in output in the second quarter of the year compared to the first quarter, new figures from the Central Statistics Office (CSO) show.

On an annual basis, production in the manufacturing sector is up 6.6 per cent to the end of June, but the growth has been spurred by accelerating production in the chemicals sector.

Business group Ibec said the industrial production data showed "little cause for comfort".

The "modern" manufacturing sector, which comprises both the chemicals and high-technology industries, showed an annual increase in production of 10.5 per cent.

However, this masked a 3.8 per cent decrease in production in the "traditional" manufacturing sector.

Manufacturing output in the first half of 2008 was 3.5 per cent up on the first half of 2007, but this represents a marked slowdown on the first-half growth of 7.5 per cent in 2007, according to Ibec chief economist David Croughan.

Output in the recorded media sector was strong, with first-half growth of 9.1 per cent.

Production of medical and precision instruments, meanwhile, recorded first-half growth of 7.3 per cent.

"Chemicals, pharmaceuticals and medical equipment sectors are less affected by the economic cycle, but sectors more exposed to economic conditions and the strength of the exchange rate are not doing well," Mr Croughan said.

Computer output slowed significantly in the second quarter, down from 5.1 per cent in the first quarter to 0.9 per cent.

Output in the food sector has fallen by an annual rate of 5.2 per cent, while there were record sharp declines in construction-related sectors such as wood, where output is declining by 27 per cent annually.

"The very difficult trading conditions being experienced across most sectors of manufacturing, resulting in falling output, must be reflected in a sensible approach to wage demands over the next year," Mr Croughan said.