Exports continued to drive the manufacturing sector in January, as output rose at its fastest pace in more than 10 years.

The NCB manufacturing PMI said "substantial" production growth was recorded last month, with new orders surging and growth in purchasing activity the strongest in 11 months. The overall index rose to 55.8 in January from 52.2 in December.

"This signalled a marked improvement in operating conditions in the sector, and the strongest since April 2000," the report said.

New business rose at a sharper pace as weather conditions improved, while new export orders recorded the third-fastest rise in the series history.

The production index rose to 59.0 from 53.1 a month earlier, above the 50 mark that separates growth from contractions, while new orders were 58.8 from 53.2.

"This represents a bounce back from December, but as the figures in December were above 50 it indicates that there is an underlying strength in manufacturing output regardless of the post bad weather rebound," NCB said.

Employment was also up, the second month in a row that it has increased. However, industrial employment in Ireland accounts for only 13 per cent of total employment.

"We expect total employment to contract once again in 2011 on the back of weak domestic demand," NCB said.