Conditions in the Irish manufacturing sector improved slightly last month, but the pace of growth was the slowest since September, 2003. according to the latest NCB Purchasing Managers' Index.

The seasonally adjusted index stood at 50.7 in March. Any expansion above 50.0 indicates expansion.

However, the figure was down from 51.8 in February.

"Manufacturing activity appears to be expanding only modestly, mainly as a result of weakening export demand," said Mr Eunan King, NCB's senior economist.

The survey data showed that the levels of incoming new business for Irish manufacturers increased in March, but at the slowest pace in four months.

New export orders actually slowed a slight decline, following four consecutive months of growth.

The volume of production continued to grow last month.

"However, as levels of new business rose more slowly, the rate of output growth eased gain and was modest," said the NCB report.

It said manufacturers are continuing to reduce their backlogs of work outstanding, and at the sharpest rate for five months.

Firms surveyed explained that the reduction reflected capacity freed up during weaker growth of demand, but also improved efficiency.

Staffing levels increased again in March, in keeping with the recent trend.

"However, the rate of job creation was marginal, slightly less marked than in February, and the weakest for 10 months."

Last month also saw a decline in purchasing activity among Irish manufacturers for the first time in 18 months

However, NCB said the decline was slight.

Irish manufacturers continued to report sharp growth in their average input costs.

"Furthermore, the inflation rate accelerated slightly in March, after easing through the previous four months," said the NCB report.