OFFICIAL figures, published last night, reveal a big drop in unemployment last month, with the number of people signing on the live register down by 2,900 to 278,800. The sharp drop in the seasonally adjusted live register was good news for the Government. Unemployment increased by 400 in February.

Further evidence of strong economic growth was provided by figures showing a buoyant housing market (see report below) and an increase in lending from banks and building societies.

However, analysts warned last night the Central Bank's borrowing figures meant a further reduction in interest rates was less likely.

Last night, a Government spokesman said the unemployment figures were "very encouraging".

When adjusted for seasonal factors, the latest Central Statistics Office (CSO) figures showed in the 12 months to the end of March the number of jobless fell by 4,700 overall.

The number of people under 25 years of age claiming unemployment benefits fell by 2,591 to 71,563 in March, according to the CSO.

The Government spokesman said the figures showed continuing strong economic growth, low inflation and record job creation levels were having a "positive impact" on the job

The accuracy of the live register figures has been called into question, following Labour Force Survey figures for last April which showed 80,000 fewer people out of work than that recorded by CSO figures.

Yesterday, Progressive Democrat leader, Ms Mary Harney, called on the Government to urgently "clarify" the position in relation to unemployment statistics. "If we do not know how many people are out of work we cannot plan a proper employment strategy," she said.

The Irish National Organisation of the Unemployed said the latest figures should give the Government further reason to "seriously reconsider the relevance of its policies".

Official figures on the construction sector showed that employment "is running 6.7 per cent up on the previous year. Employment in the financial institutions was up 3.3 per cent in the 12 months to the end of 1995.

However, the strength of the economy made a further reduction in interest rates less likely as the Central Bank would be increasingly wary of inflation.

The Central Bank statistics showed continued strong demand for credit, a key inflationary indicator for the bank.

The figures showed private sector credit rose by 11.2 per cent in February, compared with 10.8 per cent in January, according to the Central Bank.

Year on year, the figures recorded a 13.8 per cent increase in residential mortgages in February, from 13.5 per cent the previous month.