Activity within the traditional manufacturing sector contracted sharply in May, while technology and pharmaceutical firms saw reasonably healthy growth, according to the latest release from the Central Statistics Office (CSO).

The seasonally adjusted numbers show that companies involved in "modern" manufacturing raised production levels by 3.5 per cent between April and May. More traditional companies, however, suffered shrinkage of 4.7 per cent.

The divergence between sectors is also apparent in annual comparisons, with the modern sector growing by 2.9 per cent over the year to May and the traditional sector falling back by 0.2 per cent.

Production over all industries was 2.2 per cent higher in May this year than in the same month of 2002.

Friends First chief economist Mr Jim Power said it was clear that traditional manufacturing firms were facing into a tough future, while the modern sector was performing "modestly well".

He said the prognosis for traditional firms was poor and predicted that they would be the source of the bulk of manufacturing job losses over coming months.

The traditional sector accounts for about half of all industrial production.