Although the rate of decline was only marginal and eased to the slowest in the current 16-month period of reduction activity levels fell across three of the four sectors monitored by the survey, with manufacturing the exception.
The slower decline in overall activity signalled by the latest survey was closely linked to a much weaker decrease in incoming new work.
The rate of contraction in new work eased to the slowest in the current period of decline, which now extends to 40 months.
Commenting on the latest survey findings, Richard Ramsey, Chief Economist Northern Ireland, Ulster Bank, said: "Since November 2007, the PMI has signalled a contraction in private sector output each month bar one.
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"Clearly, private sector activity cannot keep falling indefinitely and we are either at or very close to the bottom. It should also be noted that not all firms and sectors have been contracting since late-2007.
"Indeed, the latest survey for March signals that the period of contraction has, at least for now, effectively come to an end. However, Northern Ireland firms continue to reduce their workforce numbers, as they have done each month since March 2008.
"Northern Ireland remains the only UK region not reporting a rise in staffing levels. At a sector level, the manufacturing industry continues to be the best performer. Local manufacturing firms reported an increase in output and new orders in March, with the latter representing the best reading since April last year.
"Furthermore, manufacturing employment has stabilised since last October. This compares with rapid employment growth within the UK as a whole. Meanwhile, the sharp rates of contraction in output and orders within the services sector have eased significantly during the last two months," said Mr Ramsey who added that the construction industry continues to experience the most challenging conditions within all the sectors.
"Job losses within the construction sector accelerated in March and the squeeze on profit margins intensified further. Inflationary pressures remain a concern across all sectors but are most acute within the retail and manufacturing sectors.
"However, both of these sectors are passing on price rises to their customers unlike their counterparts within the services and construction sectors," he concluded.
(GK/BMcC)
