DUBLIN, Jan 2 (Reuters) - Ireland's manufacturing sector shrank again last month although at a slightly slower pace than in November as poor demand and a strong euro took their toll, data on Friday showed. The NCB Purchasing Managers' Index (PMI), which measures Irish manufacturing activity, recorded 37.9 in December from 37.1 in November.
November's performance was the worst since the survey began in May 1998.
"December data pointed to another considerable deterioration of operating conditions in the Irish manufacturing sector," said Markit, which compiles the survey."A lack of demand was the principal factor behind the latest reduction."
December was the 13th consecutive month the headline PMI reading has been below the 50.0 mark separating growth from contraction after more than four years of sustained expansion.
"The unprecedented rise in the euro against sterling is heaping further pain on manufacturers in the traditional sectors, with some simply finding it uneconomic to continue servicing the UK market," said Brian Devine, economist at NCB stockbrokers.
At 36.3, the employment component of the index fell to an all-time low as companies adapted to tougher conditions. It was sharply lower than 40.1 in November. Output and new orders both continued to contract last month.
"New business fell sharply as uncertainty among clients led them to postpone new projects. Some panellists reported particularly weak demand from Europe," said Markit.
NCB's Devine said manufacturing companies across the globe were having to contend with an international slowdown in trade.
"Irish firms in the hi-tech sector have been faring relatively well to-date but are likely to come under increasing pressure as global trade slows further in the first half of 2009," said Devine.
Business cost inflation fell in December to its weakest since June 2003. "Respondents noted that the costs of many raw materials including oil, plastics and metals had fallen over the month," Markit said.
Hit by a double whammy of a domestic construction downturn and global financial turmoil, Ireland became the first euro zone country to enter recession in 2008.
Economists expect Ireland's gross domestic product to contract by 3.5 percent in 2009, according to the latest Reuters poll.
(Reporting by Jonathan Saul; editing by Tony Austin)