The manufacturing sector experienced a fifth successive month of decline in February, with exports hit by lower demand in Europe, according to the latest statistics from NCB.

Commenting on the purchasing manager's index, chief economist Mr Dermot O'Brien said export orders were at their lowest since October 2001, mainly due to weak demand in Europe. He said input costs, including oil prices, rose again in February and this also contributed to the weakening figures

According to NCB, total order books contracted for the fifth successive month, although the rate of decline in new orders remained modest and eased slightly compared to January. The index itself fell from 48.8 in January to 48.3 in February.

However on the export side, new foreign business declined for the seventh month running and at the sharpest rate since October 2001. Firms surveyed by NCB noted weaker demand from many European countries during the month, but particularly in Germany.

Manufacturing output was scaled back for the second month in a row in February, as firms adjusted production schedules in line with weaker order book volumes. Firms surveyed by NCB said they had scaled back their inventories during February as part of a general drive to improve cost structures.

In relation to higher input costs, the survey cited higher oil prices as being a significant factor. "Nevertheless, the rate of inflation was fractionally less marked than that seen the previous month," the survey stated.

Irish manufacturing employment was trimmed for the sixth successive month in February, as firms sought to limit overheads by shedding excess capacity. "However, despite an acceleration in the rate of job shedding, the pace of decline of employment remained slower than December's 13-month record pace," said the survey.

The Irish trend was contrary to that being seen across Europe where manufacturers increased production and won more orders in February after five months of shrinking activity, the Reuters Euro zone purchasing managers index said.

"The index was driven upwards by increases in both output and order books, but dragged down by a further marked drop in employment," said NTC Research, which compiled the survey of 2,500 manufacturing companies.

Euro zone manufacturing has been stuck in contraction for much of the past two years, lagging an uneven recovery in the US.

The ECB meets on Thursday and is expected to cut its benchmark repo rate from 2.75 per cent to protect business and consumer confidence against depressed share prices, worries about the financial sector and war fears.