Exports rebounded in the second quarter of the year, but the Republic's trade surplus with the rest of the world still continues to shrink.

According to the latest figures from the Central Statistics Office, the value of goods exported rose by 1 per cent in July to €6,977 million.

However, they were down 2 per cent on the same month last year.

Analysts focused on underlying trends which they said identified an improvement in the economies performance.

On a volume - rather than value basis - exports rose 4.7 per cent year on year in the first quarter, said Davy Stockbrokers, who predict that total export growth - including services - may have reached 6 per cent.

There were improvements in a number of key sectors, according to Goodbody Stockbrokers.

They said that exports of chemicals and related products were up by 10.6 per cent on a three months moving average basis.

This sector accounts for just under half the goods exported each year in terms of value. Exports of machinery and transport equipment where up 4.2 per cent on this basis, said Goodbody.

Imports also grew in July on a annual basis, rising by 5 percent to €4,624 million.

They were driven primarily by strong consumer demand and increased investment by business.

The monthly trade surplus rose from €2,277 million in June to €2,503 million in July.

The cumulative surplus for the first half of the year stood at €18,751 million compared to €20.472 million at this point last year.

Alan McQuaid of Bloxham Stockbrokers predicted said that the 2005 trade surplus is likely to be lower than the €33.3 billion reported last year, notwithstanding the positive trends emerging in the July data.

He predicted an outurn of €31 billion for 2005.