Manufacturing output slowed sharply in the second quarter of the year, according to the latest figures published by the Central Statistics Office.

The figures show seasonally adjusted industrial production volumes in the manufacturing sector between April and June were 8.8 per cent lower than in the preceding three-month period.

The slowdown was particularly pronounced in the chemicals sector. After a strong start to 2007, output growth in this sector plummeted by almost 20 per cent compared to the opening quarter.

Alan McQuaid, economist at Bloxham stockbrokers, pointed out that while the latest figures were worse than expected, output in the chemicals sector can be extremely volatile due to the small number of large companies operating.

Despite the disappointing figures, Mr McQuaid remained relatively upbeat. "With global economic growth likely to be strong again this year and next, demand for Irish goods should remain quite healthy over the next 12 months.

"A lot will obviously depend on what happens on the inflation and exchange-rate fronts, particularly inflation, and neither of these are favourable at the moment," Mr McQuaid added.

Nevertheless he predicted that industrial production would rise by between 5 and 8 per cent in 2007, which he said should boost GDP growth this year.

The chief economist at employers' group Ibec, David Croughan, said the slowdown evident in the second quarter pointed to "continuing difficult trading conditions for industry" and the need to improve competitiveness by controlling costs.

"These are still rising sharply, while at the same time manufacturers are faced with stable or declining prices for their products," he said.