The services sector grew at a slightly weaker pace last month but employment rose for the first time in 11 months and confidence hit a near 2-year high.

The NCB Purchasing Managers' Index (PMI), which measures activity in the services sector, fell to 52.1 from 53.3 in February.

But it stayed above the 50 mark that signals growth for the second month in a row.

NCB said that total new business increased for the second month in a row in March with some companies saying they had managed to secure new clients.

New export business rose for the eighth month in a row, with Asian markets the key sources of growth.

Today's index reveals that Irish services firms increased employment levels for the first time in 11 months, however the increase was quite slight.

The higher staffing levels was linked to increased workloads.

Employment has only risen above the 50 mark on a monthly basis twice since February 2008 when the first signs of the country's financial crisis emerged.

The index also showed that higher energy and fuel costs were the main drivers of input inflation last month. Input costs have now risen for 16 months in a row. Companies continued to lower their output charges due to strong competition and discount requests from clients.

NCB said that service providers were optimistic that activity will be higher in 12 months' time than current levels. The level of positive sentiment was at the highest level since May 2010.

NCB's chief economist Brian Devine said the fact that employment levels had expanded was a positive sign coming on the back of the expansion in employment in the last quarter of 2011.

PMI data on Monday showed that manufacturing activity grew for the first time in five months in March. This was in stark contrast to the euro zone as a whole where the sector shrank for an eighth month and at a faster pace.