Industrial production in the Republic increased in the three months to February, prompting hopes of a recovery in the sector.

The Central Statistics Office (CSO) released figures yesterday showing that the volume of production for manufacturing industries in the quarter from December to February was up 2.6 per cent on the previous three-month period. Turnover increased 1.8 per cent over the same period.

On a year-on-year basis, production in February this year was down 5.7 per cent on the same month in 2004. But turnover in February 2005 was up 5.3 per cent on the same month last year.

The figures prompted most analysts yesterday to predict that a recovery was on the way in the sector, which declined by 0.4 per cent last year after posting annual growth of 15.7 per cent in 2000.

However, Jim Power, chief economist with Friends First, stressed that it was likely to be a "gradual rather than a strong recovery". He said the sector was under pressure from increased international competition, adverse exchange rate patterns and a more challenging export environment.

"The sooner the Government actually does something, rather than just pay lip service to the recommendations of the Enterprise Strategy Group, the better for this important component of the Irish economy," Mr Power warned.

Alan McQuaid of stockbroking firm Bloxham predicted that stronger global demand this year would lift industrial output.