Recovery in the manufacturing sector remained fragile in August as new export orders and employment grew but the overall index contracted, according to the NCB Purchasing Managers' Index (PMI).

Headline manufacturing PMI, a composite measure, was 49.7 in August, below the 50 mark that separates growth from contraction. That was a marginal decline and higher than the 48.2 reading in July.

The fall was blamed on a reduction in new orders, which contracted for the third consecutive month, falling to 47.7 from 47.9 a month earlier as the domestic market remained challenged.

Exports proved more resilient, as in other months, with new export orders up to 53.5 from 51.3, the sharpest rise in 11 months. However, with Ireland's main export partners facing economic slowdown, figures could edge lower in the coming months.

"We expect Ireland's main trading partners to slow into the second half of 2012, which will be a drag on Irish exports and growth," said NCB chief economist Brian Devine.

Output expanded for the first time in three months, with the index measuring this at 52.4. Employment also grew marginally, at 51.1, fuelled by increased external demand.

Output costs rose during the month, as manufacturers were hit with higher oil and raw material prices. However, output prices lowered for the first time in 2011 to date as intense competition forced manufacturers to react.