DUBLIN, Aug 5 (Reuters) - Ireland's services sector shrank in July at the slowest rate for 14 months, a slight improvement from June, with companies optimistic about prospects for a third successive month, a survey showed on Wednesday.
The NCB Purchasing Managers' Index rose to 42.4 in July from 42.3, the highest mark since May 2008, with the gauge of business expectations slightly down at 53.9 from June's 9-month high of 54.8 but still firmly above the 50 mark which separates growth from contraction.
"According to respondents, optimism was largely due to a hope that the Irish economy will begin to recover next year, with the current economic situation proving to be the nadir for activity," said Brian Devine, economist at NCB Stockbrokers.
The July data signalled an 18th consecutive monthly fall in activity at Irish service providers with the steepest reduction in the transport and leisure sector.
Economists polled by Reuters on Tuesday saw gross domestic product (GDP), which they forecast will shrink by 8.5 percent year-on-year for 2009, turning positive in 2011 with some calling a bottom to the recession in early 2010.
However, they also expected unemployment to hit 15.5 percent at the end of 2010 and the PMI survey's employment component indicated the 17th successive month when firms shed jobs.
The fall in employment largely reflected further adjustments to lower activity requirements, while there were also reports that jobs had been cut in an attempt to reduce costs, said Markit, which compiles the data.
Lower salary payments were a key factor behind the latest fall in input costs, it added, with input prices declining at the second-fastest pace in the series history in July.
Another PMI survey this week showed Ireland's manufacturing sector contracted at the slowest pace for 10 months in June but fragile demand, both at home and abroad, continued to crimp output. (Reporting by Padraic Halpin, editing by Stephen Nisbet)