The manufacturing sector expanded marginally in April, as a contraction in output was offset by a rise in new orders and export business.

The headline NCB Manufacturing PMI edged just above the 50 level that separates expansion from contraction, at 50.1.

Output for the month shrank, registering 48.7. That was the first fall in three months, prompting concerns about the momentum of the sector's recovery.

But there was some optimism about the domestic economy, and new orders continued to increase, while firms took on staff at a faster pace. New orders were 51.4, while export orders were 53.1 over the month.

"Although slowing from that registered in the previous month, the rate of expansion was still solid," NCB said. "Anecdotal evidence pointed to higher new orders from Asia and the US."

Employment registered 52.9, the second consecutive rise, and the sharpest since April 2011. Companies attributed the increase in part to the introduction of new products.

"The domestic part of the economy is starting to look a bit better and tomorrow's unemployment data should show a further tick down in the unemployment rate, " said NCB chief economist Brian Devine. "The external data though is a drag, particularly from the euro area, and as a result industrial production was down 3.9 per cent in the quarter to February 2012. The data from Europe is still weak and its unlikely that Friday's industrial production data for March will do enough to alter a first quarter decline."

But input costs also edged higher, showing a sharp rise as they rose for a fifth successive month.Higher oil prices were blamed for the latest rise, but manufacturers were still forced to lower the prices they charged as competition remained strong, preventing many firms from passing on the costs to clients.