The services sector posted another month of strong growth in June as business confidence remained high and new orders flowed in, according to the latest edition of the NCB Purchasing Managers' Services Index.

The research, published yesterday, shows that more than one third of firms in the services sector grew their businesses last month. This was more than double the proportion who said activity had declined.

The overall index produced a June reading of 60.5, down just slightly from the high of 61.2 recorded in May.

A reading above 50 signals expansion, with results above 60 pointing to very strong growth.

The performance of the Republic's services sector compares well with the euro zone as a whole, where the June services Purchasing Managers' Index (PMI) reading reached just 53.1.

"The services PMI continues to show a robust rate of expansion in Ireland," said NCB chief economist, Dermot O'Brien, yesterday.

He noted however that costs had continued to rise for companies in the sector, with the amount the firms charge for their services actually falling amid increasing competition.

A breakdown of the PMI shows that higher costs were linked mostly to staff salaries and an increase in prices for items linked to oil such as fuel.

The survey reveals a sharp increase in services employment for June, with the rate of increase staying close to previous high levels.

Firms responding to the survey pointed to expansion programmes among the reasons for new recruitment.

Confidence across the sector was strong again last month, although the degree of optimism slipped back a touch.

Services companies said they were expecting further growth in demand, with many citing product development and the expansion of marketing programmes as drivers of activity.

A sectoral analysis of the PMI shows that business services firms showed the strongest expansion in the sector last month.