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Output expanding but at a slower rate

THE manufacturing sector continued to expand last month but at a slower rate than previously, new figures show.

The Purchasing Managers Index (PMI), compiled by NCB stockbrokers, dropped to 55.7 in March compared with 56.7 for January.

A mark of more than 50 indicates growth; less than 50 suggests activity is declining.

March was the 13th month in a row the sector expanded, with one-third of respondents saying they increased production on the back of more new orders.

As has been the case for the past number of months, exports led the way, with the new export orders index falling more than two points but remaining at a healthy 59.2.

Employment increased for the fourth straight month, with the index touching its highest point in 11 years at 54.7.

In a sign of just how big an impact inflation is having on Irish business, input prices rose at the quickest rate on record and the 80.9 rate was far above the previous record of July 2008.

Nearly 60pc of respondents noted an increase in input costs, with higher oil prices a recurring theme among those surveyed.

NCB's chief economist Brian Devine said: "Firms were able to secure a greater amount of new business again in March, with the rate of growth steeper than the long-run series average.

"That said, the rise in overall new orders was weaker than that seen in the previous month, which enabled firms to deplete backlogs of work for the first time since last December.

"Exports had a stellar year in 2010, increasing by 9.4pc, and we expect them to grow by a further 6pc in 2011. Despite this, GNP still fell by 2.1pc and we expect another decline of 1.4pc in 2011."

He added: "It seems like an insignificant fact in light of the banking sector issues, but if it weren't for the exporting sector the economy would be in far worse shape."

PMIs around the world followed a similar path with most remaining high but slightly weaker than previous months.

In the UK, the Markit/CIPS PMI slipped to 57.1 in March from 60.9 the previous month. The figures forced a drop in sterling, while gilts also fell before coming back.

The US manufacturing sector remained in expansion mode, though price pressures increased.

The ISM's index slipped slightly to 61.2 in March from 61.4 in February.

Chinese manufacturing remained weak last month but is still in positive territory, standing at 51.8 -- up 0.1 on last month.

"Economic growth is only moderating rather than slowing too much. More importantly, price hikes have also started to slow," said Qu Hongbin, an economist at HSBC in China.

The weaker Chinese figures were offset by India, where the mood among manufacturers was more upbeat.

A HSBC-sponsored PMI there compiled from a survey of about 500 firms held steady at a four-month high of 57.9.

Irish Independent