DUBLIN, May 5 (Reuters) - Ireland's services sector expanded at its slowest pace so far this year in April, a survey showed on Thursday, as the fragile local economy capped growth in new business orders.
The NCB Purchasing Managers' Index, which measures activity in the services sector, slipped to 50.2 from 51.1 in March, barely exceeding the 50 mark separating growth from contraction which it has stood above for four consecutive months.
"This is the second month in a row that the index has fallen back towards the 50 mark," said Brian Devine, economist at NCB Stockbrokers. "When this is combined with the fact that retail sales contracted by 2.3 percent quarter-on-quarter in the first quarter of 2011 it paints a worrying picture for Irish domestic demand."
"We are more pessimistic than the consensus in relation to the prospects for 2011 and expect GNP to decline by 1.4 percent, primarily driven by a 2.2 percent decline in domestic expenditure."
With Irish domestic demand expected to remain in the doldrums this year on the back of cutbacks and high levels of personal debt, Ireland is relying on external trade to return its bruised economy to growth this year.
Total new orders at Irish services companies rose for the third month running in April although the pace of increase slowed for the second straight month and respondents indicated that the rise was largely due to orders from overseas.
On a positive note, Irish services companies raised their staffing levels for the first time since February 2008 with the employment sub-index at 51.1, a level last exceeded in October 2007, compared with 48.29 in March.
The increased recruitment reflected higher workloads, with reports of marketing and sales staff being hired during the month, but some firms still shed workers due to weakness of new order growth.
Companies also remained optimistic that business activity will be higher than the current low levels in 12 months time. (Reporting by Padraic Halpin; editing by Stephen Nisbet)