DUBLIN, July 3 (Reuters) - Ireland's services sector shrank in June at the slowest pace for more than a year, with companies expressing optimism about future prospects for the third time in four months, a survey showed on Friday.
The NCB Purchasing Managers' Index rose to 42.5 in June from 39.5 in May, the highest level since May 2008, with the gauge of business expectations at a 9-month high of 54.8, firmly above the 50 mark which seperates growth from contraction and up from May's 50.8.
"It is encouraging to note that optimism among service sector firms is gradually improving," said Brian Devine, economist at NCB Stockbrokers.
Ireland's Gross Domestic Product (GDP) fell by a record 8.5 percent in the first quarter from a year ago, data on Tuesday showed, and economists polled by Reuters expect almost the same year-on-year shrinkage for 2009 as a whole.
"While the economic contraction is undoubtedly going to be severe as the fundamental pressures continue to weigh on the economy, the pace of decline is likely to be less severe going forward as pessimism fades," Devine said.
The PMI survey's employment component indicated the 16th successive month when firms shed jobs, which reflected their declining workloads, said Markit, which compiles the data.
"However, the rate of job shedding in June was the slowest since October 2008," it said.
Data on Wednesday showed the number of people claiming unemployment benefit in Ireland rose less than expected in June and at its slowest rate since September, in a further sign that the pace of the economy's deterioration has eased.
A PMI survey this week showed Ireland's manufacturing sector contracted at the slowest pace in June since September, with fragile domestic demand somewhat offset by the slower decline of new export business. (Reporting by Andras Gergely; Editing by Andy Bruce)