While the report said business activity in the private sector continued its downward spiral last month, the decline was the slowest rate since the beginning of last year.

But margins were still under pressure, with input price inflation the strongest for a year and output charges sharply reduced.

Richard Ramsey, chief economist at the Ulster Bank, said: "While Northern Ireland's private sector continues to witness falling levels of output and employment, five of the six indicators improved during October. That said, Northern Ireland's levels of business activity have now lagged the UK average for the last two years.

"The most encouraging aspect of the latest survey was the significant easing in the rate of job losses. The pace of employment decline has not been as sharp as the UK for the last five months.

"It is noted that back in February, almost 30% of Northern Ireland firms reported falling levels of employment. Meanwhile, in October, less than half this number were still signalling job losses. This supports our view that the rate of increase in Northern Ireland's official unemployment figures will continue to ease in the fourth quarter of this year."

The Ulster Bank's report comes two weeks after surprise data showing the UK was still in recession, defying hopes that a slow recovery was in progress. Figures from the Office of National Statistics said the economy shrank by 0.4% between July and September, marking the UK's longest period in recession since 1945.

At a sector level, the PMI report showed UK and Northern Ireland services firms continue to report falling employment levels at a broadly similar rate.

One notable difference was within the manufacturing industry. While UK firms in this sector continue to report significant job losses, their Northern Ireland counterparts recorded modest employment gains, Mr Ramsey said.

"This is expected to be temporary. After all, the squeeze on profit margins, which intensified in October, is most acute within the manufacturing sector," he added.

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