Ireland’s industrial production fell in August compared with July, as manufacturing in the traditional sector shrank.

The Central Statistics Office said industrial production for the manufacturing industries fell by 0.7 per cent compared with the previous month. The modern sector, which includes high tech and chemical sectors, grew by 5.1 per cent, but the traditional manufacturing sector declined by 0.9 per cent.

Davy described the rise in the modern industries' output as "an encouraging sign", as Ireland's output growth is heavily reliant on these export industries. However, the slowdown in the traditional industry output was a worrying trend, it said, with the traditional sector employing 129,200 people compared to 63,500 in the modern sector.

On an annual basis, industrial production rose by 0.2 per cent.

Turnover was down 0.1 per cent on the month, and rose by 0.2 per cent year on year.

For the three months to August, the seasonally adjusted volume of industrial production rose by 1.8 per cent against the previous quarter.

"Whatever about the short-term, we believe that when the world economy regains momentum, Ireland is better placed than most to take advantage of that," Merrion Stockbrokers' Alan McQuaid said. "Still, as things currently stand, the Irish manufacturing sector is on course to post an overall increase in output for the third year running in 2012, with an average rise of 2.0-3.0 per cent projected."