March saw the biggest jump in activity in the services sector since November 2000, while expectations for future activity remained bright.
The latest NCB Purchasing Managers' Index (PMI) for the sector rose to 63.1 in March, up from 60.3 in February. Any value above 50 indicates rising activity. But according to a component index of the survey, measuring business costs, input cost inflation remains strong.
Growth in the transport and tourism sector registered the biggest improvement in March, but was the only sector where employment dropped. Growth also quickened for business services but fell in the technology, media and telecoms sector.
Growth in current activity levels remained steady in financial services. The index of expectations for business activity in 12 months' time was positive but at 73.7, lower than 76.2 in February, due to less confidence in future financial services activity.
Two in every five firms got new work orders as the economy continued to expand. Employment growth in March stayed close to a February's sixty three-month high as firms took on more workers to deal with backlogs, which grew at their fastest pace for five months, the survey found.
The average input costs index fell to 60.7 in March from 61.7 in February, but remained indicative of increasing business costs.
This contributed to a modest increase in prices charged by businesses, as they attempted to pass on cost rises. Only in the financial services sector did prices continue to fall in March, with increased competition causing charges to fall faster than at any time since October.
Dermot O'Brien, chief economist of NCB Stockbrokers - which undertakes the survey in Ireland - described the outturn as "impressive and promising".
National accounts data last week revealed that 2005 was the best year for growth since 2000. The services PMI, however, suggests that 2006 will "outshine that performance", he said.
According to the survey, the services sector remains buoyant in the euro zone, where the index held steady at 58.2.
