Business activity in the services sector continued to grow in February, although the pace of increase eased to its slowest rate in 10 months. Employment in the services sector also increased strongly.

The latest Purchasing Managers Index (PMI) for current business activity showed a reading of 60.3 in February.

This was down compared with the January reading of 61, but remained well above the value of 50, which indicates an increasing trend.

Although at its lowest level for 10 months, the index of Irish service sector activity remains above its historical average. Since the end of 2003, the overall index has hovered within a range between 56 and 62, showing some downward trend in recent months.

There was a particularly sharp improvement in the transport, travel and leisure sector, where the activity index jumped from 42.1 in January - indicating negative sentiment - to a strongly positive 61.3 in February.

The equivalent index for the euro zone - also published yesterday - shows confidence at a slightly lower level compared to Ireland, but following an upward trend rising to 57.7 compared with 56.6 in January.

In justifying the decision to raise interest rates across the euro zone, European Central Bank president Jean-Claude Trichet yesterday referred to rising levels of business and consumer confidence in the euro zone.

Although slightly less optimistic than before in relation to the current business situation, confidence in future prospects rose in February.

The business expectations index was rose to 76.2, compared with 75.5 in January.