FALLING DEMAND and a slowdown in new orders hit the Republic's manufacturers last month, the latest figures show. The NCB Stockbrokers' purchasing managers' index (PMI) for manufacturing shows that production contracted at its second-fastest rate in 10 years last month.

The index takes 50 as its benchmark. Any reading below this figure indicates a fall in output, any return above it signals an increase. The May PMI for manufacturing was 45.2, slightly above the 44.7 recorded in April, meaning that the rate of decline was slightly slower.

"New orders and output both fell sharply, albeit at weaker rates than in April," NCB's report says "Employee numbers and stocks of purchases both contracted, with the former falling at the sharpest pace for four months."

New orders, a measure of the rate at which manufacturers are attracting new business, dropped to 42.9. NCB says that reports from the firms surveyed indicate that this was the result of slowing demand.

"New export orders declined at the sharpest pace since June 2003 as manufacturers indicated that the strength of the euro against sterling had adversely affected demand."

The report shows that while business declined manufacturers' costs rose.

Input costs, which measure the cost of materials, energy etc, came to 65. This was below the 67.8 reading for April, indicating that the rate at which costs are increasing is easing.