THERE IS MORE bad news for the economy this afternoon, with new figures showing that the country’s manufacturing output fell sharply in September.

The Purchasing Managers’ Index, released this afternoon by NCB, showed that the size of the sector fell from 51.1 in August to 48.4 in September – a significant drop over the space of a single month.

The index fell below the 50 mark – which separates growth from contraction – for the first time since February.

Such a steep drop in output could indicate that the economy is set for an overall contraction in the third quarter of 2010, having grown in the first three months of the year but then falling between April and June.

Reuters quotes AIB’s chief bond economist, Oliver Mangan, as saying that if such indexes had fallen in other countries, “they are going to weaken in Ireland as well so we could see growth weaken again in Q4.

“What were are seeing here is an uneven recovery of activity.”

Figures released by the Central Statistics Office, meanwhile, showed that the volume of retail sales in August was 1.3% higher than it was during the same month in 2009, and up by 1% on July 2010.

When sales of new cars were discounted from that total, however, sales were down by 1.4% on August 2009. The motoring sector, the CSO said, saw the volume of sales increase by 20.4% in year-year increases.

Bars, however, saw volumes fall by 10.3%.