Manufacturing continues to grow despite signs that the slowdown in the US economy is starting to bite.

The NCB purchasing managers' index - which gives an overview of the state of the manufacturing industry - fell to 51.9 last month, its lowest level since the index started in March 1999.

The index is seasonally adjusted and readings above 50 signal that manufacturing activity is still growing.

The index is compiled from a survey of 250 companies in the Republic conducted by the stockbroker together with the Irish Institute of Purchasing and Materials Management. "Manufacturing activity continues to grow, albeit at a lower pace than in the fourth quarter of last year. Weaker external demand remains the main problem," according to Mr Dermot O'Brien, chief economist at NCB Stockbrokers. The decline in the index was attributed to a decline in the growth of new orders, which was slower than in previous months.

Weaker demand from the US and mainland Europe subdued the rate of increase of export orders, despite increased sales of certain goods to Britain on the back of the foot-and-mouth crisis. Domestic demand remains strong and strengthened total order books, according to the survey. In Europe, the purchasing managers' index for the euro zone fell, furthering the argument for an interest rate cut and putting more pressure on the euro. The euro-zone PMI for March was 51.2 against 52.3 in February.

The euro clawed its way back above $0.88 to end yesterday at $0.8816, up on its New York close last Friday of $0.8773, largely on a technical rebound from last week's heavy losses, traders said.

Analysts said it continued to be pressured by the decision of the European Central Bank (ECB) last week to resist calls for a cut in euro-zone interest rates.

The managing director of the International Monetary Fund, Mr Horst Kohler, told German parliament that a rate cut by the ECB would "definitely be helpful" for the euro-zone economy.

Investors are concerned that the ECB may instead stick to its tough anti-inflation policy and defy pressure for a cut at its next meeting, on April 11th.

The yen also suffered yesterday, falling to 126.76 yen to the dollar, breaking a 30-month record low reached earlier in Asia. The latest Tankan survey showed Japanese business confidence had plunged in the past three months, with the large manufacturers' index falling to minus five from plus 10.