DUBLIN, Oct 1 (Reuters) - Ireland's manufacturing sector shrank for the first time in seven months in September, reinforcing the view that economic expansion recorded in the first quarter of the year was short-lived.
The NCB Purchasing Managers' Index, which measures Irish manufacturing activity, fell to 48.4 from 51.1 in August, dipping below the 50 mark separating growth from contraction for the first time since February.
Ireland officially exited two years of recession in the first quarter but gross domestic product shrank again in the second quarter, data showed last month.
The government has insisted the overall trend was still pointing to economic stabilisation after an unprecedented plunge in 2009 but investors worry slower-than-expected recovery will threaten plans to cut Europe's biggest budget deficit.
"Irish GDP, after expanding in Q1 on the back of impressive manufacturing output, contracted once again in Q2," said Brian Devine, economist at NCB Stockbrokers. "The manufacturing sector has slowed even further in Q3," he said.
A day after the cabinet forecast a deficit above 30 percent of GDP, 10 times the EU's limit, because of bank bailouts, the PMI data also showed a deterioration in export business, usually touted by officials as the main route to economic revival.
The sub-index measuring new export orders fell to 49.5 from 54.5 in the previous month, the first fall since October 2009.
Overall new orders decreased for the first time in seven months and production growth slowed, while employment shrank faster. (Reporting by Andras Gergely; Editing by Toby Chopra)