UK services sector expands faster than expected

London - Britain's service sector expanded faster than expected in January after growing at the slowest pace in over a year and a half in December, a survey showed on Wednesday, boding well for economic growth in 2015.

The Markit/CIPS UK Services Purchasing Managers' Index (PMI) suggests the economy as a whole is growing at a rate slightly above the 0.5% it managed in the final three months of 2014, Markit said.

That will likely come as good news to Prime Minister David Cameron, who hopes the strength of Britain's economic recovery will persuade voters to return him to power in a national election on May 7.

The services PMI rose to 57.2 in January from 55.8 in December, a 17-month low, topping all forecasts in a Reuters poll and staying well above the 50 mark denoting growth.

"The data will allay fears that the economy is slowing sharply, having merely seen growth cool during the winter to a more sustainable pace," said Chris Williamson, chief economist at Markit.

"Even more encouraging is the upturn in employment. The surveys are currently signalling an impressive net rate of job creation of approximately 70 000 per month."

Official data has shown a reduced pace of job creation in recent months, even as the headline employment rate fell to its lowest level in more than six years at 5.8%.

But the services PMI's employment index rose by more than 2 points to 57.1 - the best reading since last June and jointly the second-highest in the survey's 19-year history.

Growth and hiring across the construction and manufacturing industries also quickened, according to similar PMI surveys earlier this week.

The UK composite PMI, which combines data from manufacturing, construction and services, rose to 56.9 in January from 55.5 in December.

Prices paid by services companies for goods and energy rose at the slowest pace since June 2009. Sharp falls in the price of fuel - driven down by oil prices more than halving over the last six months - led to cuts in operating costs at many companies.

Markit's Williamson said the lack of inflation pressures meant there was little likelihood of the Bank of England raising interest rates any time soon, leaving early 2016 as the most likely time for a first rate hike.