The value of trade between the Republic and the rest of the world dropped sharply in the first quarter of the year, according to the latest data from the Central Statistics Office (CSO).

The seasonally adjusted trade figures show that the value of exports in the first quarter, at €19.7 billion, was 22 per cent lower than the same months of 2002. Imports dropped by 23 per cent to €11.9 billion.

The declines suggest that Irish exporters have come under significant pressure, both from faltering global demand and the continuing strength of the euro.

The CSO has attached a health warning to the numbers, however, noting that they were influenced by "a very significant fall" in the pattern of some machinery trade with Britain.

Exports in this sector fell back by 64 per cent to €1.3 billion on an annual basis, while exports to Britain were almost halved to €3.4 billion.

Trade in other sectors was also fragile however, with organic chemicals exports falling 26 per cent and exports of computer equipment falling 20 per cent.

Mr Jim Power, chief economist with Friends First, acknowledged that the strength of the euro would imply an annual drop in the value of dollar and sterling income from exports but said the weakness of external markets and increasing costs represented more significant problems for the externally traded sector.

Monthly trade figures support the image of a sector in trouble, with the value of exports falling by 7 per cent to €6.3 billion between February and March.

Initial indicators for April may offer some hope however, pointing to monthly value growth of almost 10 per cent in exports.

Such expansion, if maintained when the figures are finalised, would still leave exports significantly below levels recorded last year. It would, however, lead to a significant rise in the State's trade surplus, lifting it from €2.5 billion to €2.9 billion.

Bloxham Stockbrokers chief economist Mr Alan McQuaid said the increase in the surplus, which reflects the excess value of exports over imports, should offer encouragement on the economy's move towards recovery.

Separate figures released by the CSO yesterday confirmed that the appreciation of the euro was hitting the margins of domestic manufacturing firms.

Manufacturing output prices were 10 per cent lower in the first five months of the year than for the same months of 2002, the Wholesale Price Index shows.