Manufacturing production levels are running well ahead of last year, despite the combined pressures of high domestic inflation and a rising euro, according to new data from the Central Statistics Office (CSO).

The seasonally adjusted figures show that production for the three months ending in April was 8.8 per cent ahead of the preceding quarter. Figures for April show that, on an annual basis, production was 8.3 per cent higher.

Much of the growth, however, is likely to be linked to a drop in production levels in the same month of 2002. It is also probable that a large element of the three-month growth is attributable to a particular expansion in activity recorded in February.

Mr Jim Power, chief economist with Friends First, said the thrust of the numbers suggested that the economy continued to grow, describing the expansion as positive "in the circumstances".

He expressed concern, however, about "the sharp dichotomy" in performance between the traditional and modern sections of the industrial base.

A breakdown of the overall numbers points to growth of 10.4 per cent in sectors including chemical and technology companies in April, but this drops to 3.7 per cent within the traditional sector.

Mr Power said this trend reflected the Government's emphasis on attracting investment from so-called "modern" companies.

"This policy has been very successful but the problems facing the traditional sector have been badly exposed over the past couple of years by rising wage costs, higher insurance costs and a general loss of competitiveness," he said.

A detailed CSO analysis of activity over the first quarter of the year shows that production in the pharmaceutical, medicinal and botanical sector was 20.3 per cent higher than in 2002. Chemical companies raised production levels by 14.7 per cent.