UK service growth slows in January, but still strong at 58.3

The UK’s powerhouse services industry — spanning hairdressers to accountants — is in its most upbeat mood for almost four years, putting the economy for faster growth today.

Despite a January blip for the Chartered Institute of Purchasing & Supply’s activity index, which eased from 58.8 to a seven-month low of 58.3, the survey remains strongly in growth territory.

Following upbeat data from construction and manufacturers the surveys are consistent with quarterly growth of 0.8 per cent — faster than the 0.7 per cent seen in the final three months of last year.

“Even with the easing seen in January, the sector is still expanding at a rate that bodes well for another strong GDP reading in the first quarter,” said Chris Williamson, chief economist at survey compiler Markit.

Confidence is growing at its fastest since March 2010, with firms planning to keep hiring and raise investment amid rising hopes for a sustained recovery. Work backlogs are rising at their fastest rate since May 1997, prompting firms to push up prices, Cips added.

Rob Wood at Berenberg said January’s slowdown was “little surprise and no cause for worry”.

He added: “Combined with a manufacturing PMI way above past averages and an outright booming construction sector, today’s services reading signals continued strong growth. Monetary policy is getting traction, employment is booming, and the UK’s main trading partner is moving further into expansionary territory.”