Growth in new business spurred continued expansion in services last month, according to figures published yesterday.

The NCB Purchasing Managers' Index (PMI) for the services sector hit 58.6 in December.

Any reading above 50 indicates growth on the previous month, while any result below that signals a contraction in activity.

The December return showed that growth had slowed slightly on November, when the index reached a four-month peak of 59.4.

The report yesterday stated that many of the 600 purchasing managers surveyed reported that "new work from both fresh and established sources had contributed to strong overall demand".

Jobs growth in the services industry reflected the overall index. Employment reached 53.4, showing that workforce expansion eased in November when it reached 55.3. This was a result of more companies keeping staffing levels on hold. However, 15 per cent of those surveyed reported that they had hired extra workers, twice the number that said they cut back during the month.

The industry continued to deal with sharp increases in costs during December. Almost 28 per cent of respondents said input prices rose during the month. Many of them blamed extra staff costs and higher fuel prices for this problem. A number also said that their rents rose.

The index shows that costs rose to 62.4 in December. However, it also states that the seasonally adjusted figure was 61.8, compared with 63 in November. It was the second month in a row that the inflation rate eased.

Some of the businesses passed the cost increases on to their customers. Average prices charged rose above the 50 mark for the third month in a row to 51.3, compared with 50.8 in November.