Ireland's services sector continued to expand in June despite a contraction in new business for the second month in a row and a fall in employment in the sector.

The NCB services purchasing managers index was at 52.4 for the month, above the 50 mark that separates expansion from contraction.

The latest NCB services PMI shows that activity in the sector is still expanding with the index at 52.4 in June.

New orders were at 49.4 for the month, mainly dragged down by the domestic market. In contrast, the index of the market for new export orders was 53.1, slightly slower than in May but a solid rise. 

"New business contracted for the second month in a row amid fragile client confidence, while employment in the sector continued to contract," said NCB chief economist Brian Devine.

"New export orders though continued to increase and this has been an important driver of Ireland's export driven recovery with services exports up 8.0 per cent year on year in the first quarter of 2011."

However service providers remained optimistic about the prospects for the sector. "Positive expectations mainly reflected predictions of improving economic conditions over the coming year," NCB said. The index registered 60.3 for June, indicating strong optimism, but slightly less than the 62.3 recorded in May.

Growth in the wider euro zone services sector slowed for a third straight month in June, as new orders were also sluggish.