Further evidence of a recovery in Irish manufacturing was signalled by NCB's purchasing managers' index (PMI) for March.

The index rose marginally to 50.5 in March, from 50.4 in the previous month.

But it remained close to the critical no-change mark of 50.0 that divides contraction and expansion. The index has risen steadily from a low of 46.1 last October.

"With the overall PMI index above 50 for the second consecutive month, and well off its October 2001 low, the recovery in Irish manufacturing industry is clearly well under way," said Mr Eunan King, senior economist at NCB Stockbrokers.

"The recovery is being led by growth in export orders where the reading of 53.0 in March was the highest since November 2000."

Two of the five components used in the calculation of the PMI - output and new orders, which NCB said tend to act as leading indicators of the health of the manufacturing economy - both recorded growth in March.

Measured overall, manufacturing order books expanded for the third consecutive month in March.

However, despite rising at the fastest rate since February 2001, the rate of growth of new orders remained subdued, NCB said.

With firms surveyed generally reporting increased demand from a number of European countries during the month, much of the improvement in total order books was attributed to the rise in export orders, which rose for the third month running and at the fastest pace since November 2000.

In line with a further modest strengthening of demand, production was also stepped up for the third successive month in March. The rate of expansion of output remained weak, despite the seasonally adjusted output index rising to its highest level since last July.

The rise in the PMI was restricted by a continuing fall in employment, which NCB said tended to act as a lagging indicator, depleted stocks of purchases and a shortening of suppliers' delivery times.

Stocks of purchases were depleted for the twelfth month in a row in March, despite the recent recovery in manufacturing order books and higher production levels.

In most cases, firms reported deliberate de-stocking policies aimed at improving overall operating efficiency as the principal reason for the decline.

Further evidence of inventory correction was shown in March's data on stocks of finished goods, which fell for the eighth month running and at the fastest rate in the four-year survey history.

In a general reflection of the sustained weakness of demand for raw materials over recent months, average input prices continued to fall in March, NCB said.

But the rate of deflation was the weakest in the current period of falling prices which began last August.

Overall manufacturing employment fell for the ninth month running in March.

But, despite a marginal acceleration, the rate of decline of staffing levels remained only modest.