Irish manufacturing firms said conditions deteriorated again in December, as new orders fell sharply, fuelled by fragile economic conditions and uncertainty in the euro zone.

According to the NCB Purchasing Managers' Index, which provides a measure of the health of the manufacturing industry, the sector shrank again last month, with a reading of 48.6 for the month. "That said, the rate of contraction was slower than that seen in the previous month, and only slight," the report said.

New orders fell sharply to 46.0 from 49.7 a month earlier, and the weak demand led to a slight cut in production and a reduction in outstanding business that was the fastest in three months.

Input costs continued to rise, while increased competition led to a fall in output prices.

However, there was some positive news, with export orders growing slightly during the month, at 50.8. This follows a reading of 49.9 last month.

"Despite the slowdown in global growth, Irish exports will remain positive in 2012," NCB chief economist Brian Devine said. "We once again expect a large positive contribution from net exports in 2012 and for this contribution to outweigh the continued weakness in the domestic part of the economy."

Employment also increased slightly in December with a reading of 50.5, the first rise since August.

NCB said gross domestic product would grow by 0.7 per cent in 2012, but employment would continue to fall, making it a fifth year of decline.