- Stronger activity and new business despite poor weather
- Best gain in employment for six months
- Business confidence improved to highest since May 2012

The Markit/CIPS service sector gauge rose to the 51.5 point mark during the month of January, well ahead of the previous month's reading of 48.9. The figures show that the sector registered a modest pace of expansion, and the strongest since last September, despite the heavy snow and various instances of severe weather.

The consensus estimate had been for an increase to 49.5.

December's fall below the 50 point unchanged level marked the first fall in activity levels for two years. Even so, David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, highlighted the fact "Revivals in 2011 and 2012 dissipated pretty quickly, so firms will be hoping this is third time lucky and a stable foundation for growth."

Volumes of incoming new business increased (to 52.7 from 49.4) and companies boosted capacity by adding to their payrolls. The rise in payroll numbers was the sharpest for six months (the sub-index improved to 51.6 from 49.8).

Panellists indicated an underlying improvement in demand, and better market confidence. Sales drives and successful marketing also helped support a solid increase in new business since December.

Confidence in the future also strengthened (the expectations index improved to 67.2 from 64), reaching an eight-month high, but margins continued to be squeezed as output charges rose at a considerably slower rate than input costs. The latter increased at their fastest pace in nine months.

Chris Williamson, Chief Economist at survey compilers Markit, had this to say "A huge sigh of relief accompanies these numbers, as a return to growth of the service sector in January greatly reduces the likelihood of the UK falling back into a "triple-dip" recession."

For their part, economists at Barclays Research were of the following opinion: "Although at this level the index is consistent with only moderate growth, the improvement in the forward-looking measures sets the scene for a gradual pick-up in services activity during this quarter. (...) Without more momentum picking up in the other sectors, however, we believe the most we can expect is a measured recovery."

AB

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