THE NCB Services Purchasing Managers’ Index inched closer to a return to growth in March, recording its highest level in more than a year.

The index rose to 49.6 from 48.8 a month before, the best reading since January 2008, but new orders continued to contract as domestic demand underperformed. NCB blamed the decline on “fragile” economic conditions and intense competition.

The data, released yesterday, showed new orders had fallen continuously since February 2008.

However, new export orders continued the rising trend of the past seven months, a sign NCB described as “encouraging”.

“We expect the current account, trade balance plus income balance, to turn from deficit to surplus in 2010 on the back of strong export performance relative to import performance,” said NCB economist Brian Devine.

“A current account surplus also implies that the huge increase in the private sector savings rate is offsetting the large amount of government borrowing, so that Ireland will actually be a net lender to the world.”

Business activity also declined during March, the 26th month of contraction, but the rate of reduction has slowed and NCB described it as “marginal”.

Sentiment at Irish service providers was also improved in March, as predicted improvements in wider economic conditions and subsequent increases in new orders had a positive effect.

Irish manufacturing output showed a sharp rise in March, increasing at its fastest pace since June 2006 and snapping a trend of three successive monthly declines.