Growth in the services sector accelerated at its fastest rate in four and a half years last month, according to data published yesterday.

The NCB purchasing managers' index recorded a reading of 61.2, ahead of the 59.8 level reported for April. Any reading above 50 indicates growth while a figure below that level reflects contraction.

The performance of the services sector contrasts sharply with that of manufacturing which reported an activity level of just 50.3 earlier this week.

The NCB survey, which covers all private sector services apart from retail and wholesale businesses, also shows a sharp rise in employment. Recruitment, driven by companies' rising workloads, occurred at levels not seen since February 2001, according to the survey. This again contrasted with the experience among manufacturing companies which report falling employment prospects in May for the first time in 16 months.

Dermot O'Brien, chief economist at NCB, said "Whatever the situation in other European economies, domestic activity in Ireland continues to power ahead.

"The NCB service sector purchasing managers' index in May hit its highest level since December 2000, with strengthening growth in new business and a high level of confidence. This translated into a sharp acceleration in jobs growth with the employment index at its best level since February 2001"

Within the sector, business services continue to record the most bullish figures, with its overall activity reading of 70.2 hitting levels not seen in almost five years. Companies in the sector attributed the performance to new projects coming on line and an increase in marketing activity.

Technology, media and telecoms companies also recorded significant activity in May, with a reading of 62.2, slightly down on the 63 figure for April.

Growth in financial services was also down on the previous month but still strong at 59.5 while transport, travel, tourism and leisure companies saw a solid increase in May after being unchanged in April.