INDUSTRIAL production fell in January by almost 2pc compared with December and was down just over 3pc over the course of 2012 as pharmaceutical production tumbles.
Figures from the Central Statistics Office (CSO) show that the so-called modern sector, comprising a number of hi-technology and chemical sectors, showed a monthly decrease of 0.5pc. The traditional sector fell by 2.5pc.
The contraction in the fourth quarter was more severe than previously thought.
Stockbrokers Merrion said it was also the fourth year-on-year decrease in the past five months.
Alan McQuaid said that manufacturing growth in the short-term was expected to be driven by industries that fall under the 'modern' umbrella.
"Given the still uncertain global economic backdrop, especially in the eurozone and UK, the worry is that overall production will remain subdued in the immediate future, which doesn't augur well for the prospects of Irish exports, an integral part of the country's economic recovery hopes," he said.
But striking a more upbeat tone, Mr McQuaid said that when the world economy regained momentum, Ireland was better placed than most to take advantage of it.
"In February, the NCB Manufacturing Purchasing Managers' Index (PMI) rose to 51.5 from 50.3 in January, with the increase driven by a return to growth in new orders, which had slipped into negative territory for the first time in a year in January.
"We are hopeful that 2013 will be a better year on the economic front, both at home and abroad," he said.
Stockbrokers Davy said that weak demand conditions, and not simply the impact of the pharmaceutical patent cliff, might explain the fall in modern sector output.
"It now appears industry will make a larger negative contribution to GDP growth in Q4 than we had previously thought," chief economist Conall Mac Coille said.