Ireland's manufacturing sector continued to expand in March, but the pace of growth slowed last month, new data has shown.

The NCB manufacturing Purchasing Managers' Index fell to 55.7 from 56.7 in February, as output and new orders expanded at a slower pace.

Employment in the sector showed the strongest increase in more than 10 years as workloads grew. The index rose from 53.4 in February to 54.7 in March, the strongest reading since June 2000.

Output showed growth for the thirteenth month in a row, and although it was lower at 57.8 from a reading of 60.9 a month earlier, NCB said the pace remained "substantial".

New orders, although still expanding, fell to 57.9 in March from 59.2.

Exports continued to driven the manufacturing sector, a situation that is expected to continue for the year. Firms cited improved demand from European firms as new export orders outperformed overall new business slightly, at 59.2.

"Exports had a stellar year in 2010 increasing by 9.4 per cent and we expect them to grow by a further 6 per cent in 2011," said NCB's chief economist Brian Devine.

"Despite this, GNP still fell by -2.1 per cent and we expect another decline of -1.4 per cent in 2011. It seems like an insignificant fact in light of the banking sector issues but if it weren't for the exporting sector the economy would be in far worse shape."

Firms also felt the impact of rising oil prices, with input cost inflation at a series record in March of 80.9. NCB said almost 58 per cent of respondents said their input costs had risen, although these costs were partly passed on to clients.