Activity in the service sector grew strongly last month despite a marginal decline in the rate of growth since March, according to new research.

The latest purchasing managers' services index report by NCB Stockbrokers suggests activity in the sector was boosted last month by rising levels of new business, increased marketing and sales activity, and the development of new products.

A reading above 50 on a composite index indicates that activity is rising while a reading below 50 indicates activity is falling.

"Overall activity levels remain very strong with the index at 59.8, slowing from the previous month but still the second-highest pace of growth recorded since April 2002," said NCB Stockbrokers senior economist Eunan King.

He said confidence remained high, if below March levels, and was rising at a faster pace than in the three months before that.

"Both input prices and output prices have shown a moderation in their rates of growth in April. Employment show a still respectable pace of growth compared to the Dec-Feb period but was a bit slower than in March."

NCB said that levels of new business placed with Irish service providers improved strongly last month, but at a slower rate than in March.

"Panel firms pointed to new and repeat business during the month, underpinned by strong economic conditions and high levels of consumer and business sentiment."

While firms recruited additional workers to cope with rising levels of new business, the rate of growth eased in March to the weakest expansion in four months.

In addition, the average costs facing Irish service providers continued to climb strongly with firms citing increased wage costs and rising oil prices.