Rising import and energy prices caused by the weakness of the euro and a shortage of raw materials led to a sharp increase in manufacturing input costs last month, NCB Stockbrokers said yesterday.

NCB said the rise in input prices was causing companies to keep their stocks low and its latest Purchasing Managers Index noted a the first fall in stocks of purchases since August.

While the index said manufacturing activity continued to grow in April, the rate of expansion was weaker than towards the end of last year.

The index is a composite indicator designed to provide an overall view of activity in the manufacturing sector.

Many companies said manufacturing was constrained by a lack of suitable labour. Firms encountered difficulty finding skilled workers and people for less-skilled jobs.

The survey of 250 companies - the first published indicator of business conditions each month - rated overall manufacturing activity at 56.4 in April, up from 55.6 in March.

The index provides a qualitative rather than quantitative assessment of manufacturing conditions. While a reading above 50 shows activity is generally expanding, a reading below 50 indicates a general decline in manufacturing.

NCB's chief economist, Mr Dermot O'Brien, said the weakness of the euro was causing underlying inflation to rise, but a "relatively modest" rate.

Overall, the index rated input prices at 70.9 in April, up 1.6 points since March, but still slightly lower than in February when input prices were rated at 73.5.

This was caused by three factors, NCB said. "First, the weakness of the euro against the dollar and sterling pushed up import costs. Second, high oil prices pushed up energy costs. Third, strong demand and shortages allowed suppliers to raise prices."

Mr O'Brien said the rise in manufacturing activity was driven by growth in output and in order books.

The index said employment rose in April, but the rate of increase declined from March. This was caused by growing concerns over productivity but a "widespread shortages of staff" was also a factor.

Mr O'Brien said there was evidence of particular concern among small and medium-sized firm about their ability to recruit "suitable" staff. In the case of smaller companies, the shortage was often caused by the presence of large, high-tech multinational firms nearby.