The services sector continued to grow last month but the rate of expansion eased dramatically, the latest NCB purchasing managers' index reveals.

The index slumped to a seasonally adjusted four-month low of 52.7 from 53.9 in November but remained above the 50 point watermark, indicating positive growth over the previous month.

Business and financial services posted the highest growth levels for December, with technology, media and telecommunications diminishing significantly and tourism and travel recording the sharpest slowdown in the survey's lifespan.

Despite expanding for the thirteenth consecutive month, the services sector saw a sizeable drop in employment, evidence that growth has, in part, been achieved, through rationalisation, NCB said.

The job growth index remained below 50 points, falling to 47 from 48.2 for November.

The only sector to report increased recruitment activity was financial services, where staffing levels climbed for the ninth time in the past 10 months.

Business services recorded the most notable downturn - recruitment plunged to its lowest level since data was first collected in May, 2000.

Healthy consumer demand is believed to be responsible for overall growth as the exports market remained static, said NCB chief economist Mr Dermot O'Brien.

"Respondents attribute the continued growth in current business and their optimism for the future to the resilience of the domestic economy," he said More ominously, the rate of growth in new business dipped to a 12-month low, fuelling increased pessimism among business and financial services providers.

Inflation overshadowed the survey of 600 companies. Overheads escalated markedly in December, with wage pressure and higher oil prices cited as the causes, explained Mr O'Brien.

"In the context of the recent breakdown in national pay talks, the adverse impact of rising wage costs on inflation and employment in the services sector revealed by the survey is worthy of particular note," he said.

Prices charged increased for the fourteenth consecutive month to a record 52.6 rating. The steepest rise was recorded in the business sector. Financial services posted a decline in price inflation due, in part, to a recent interest rates cut by the European Central Bank, NCB said.

Confidence in the long-term health of the economy was most pronounced among media, telecoms and tourism players. The business sector was the least positive.