The Irish services sector grew in October at the fastest pace in five years, a new survey said today, with activity rising for the third month in a row.

The NCB Services Purchasing Managers' Index recorded 56.1 for the month, continuing the upbeat trends seen in recent months. That was above the above the 50 mark that separates growth from contraction, and outpaced the euro zone average for the services sector.

The rise in overall business activity was led by growth in new business, which at 56.9 was the highest reading since August 2007.

"Encouragingly, the improvement in business activity was broad-based, with all four sectors represented in the survey seeing a pick-up in growth during October," chief economist Philip O'Sullivan said. "In all, with expectations (66.2) little changed from September's 66.6 reading, we would expect to see the overall encouraging trends noted above persist over the remainder of the year, which would represent an impressive performance given the broader economic backdrop."

Employment also rose for a second month in a row, reaching 53.4 for the month.

The survey also found that companies remained optimistic that activity would increase over the coming 12 months, broadly in line with September's reading. Firms are also expecting higher export demand, with October reporting a sharp rise in new export orders at 57.2, the fastest rise since June 2010. The survey found the Middle East and UK were key sources of growth.

But there was some concern over the continued rise in input costs, putting pressure on firms as output prices shrank yet again due to competition and attempts to stimulate new business. "This mismatch represents an ongoing headwind for the sector," Mr O'Sullivan said.