The Irish services sector expanded at its fastest pace since August 2007 last month, new figures show.

The NCB Services Purchasing Managers index showed a reading of 56.8 in January, up from December's 55.8.

Companies reported increased new business - from both domestic and external markets - and signs of stronger momentum.

NCB noted that the rate of growth in new exports hit the highest level since the series began in June 2002 amid signs of improving global demand and the securing of new customers.

Today's survey shows that the rate of job creation at Irish service providers accelerated and was the sharpest since March 2007 as companies took on new staff to meet increased demand.

But input costs rose at the fastest pace in three months, although NCB noted that the rate of inflation remained below the series average.

Rising salaries, tax hikes and energy costs were the main reason for the latest increase in cost burdens.

While output prices continued to fall in January, the rate of decline eased to the slowest in the 54 month sequence of falling charges. NCB said that competitive pressures and attempts to boost sales led some firms to reduce prices, while others increased charges due to the higher input costs.

Describing the latest index as ''very encouraging'', NCB's chief economist Philip O'Sullivan said that it continues to point to a confident outlook for the players in the sector.

He noted that all four sub-sectors - business services, financial services, technology, media and telecoms and transport, travel and tourism and leisure - recorded an improvement in confidence levels for the next 12 months.