The services sector in the U.K. rebounded strongly in the first month of 2011 from a slump at the end of last year to boost hopes that the slowdown was weather-related and that the recovery has maintained momentum, according to Financial Times. On Thursday, the Markit/Chartered Institute for Purchasing and Supply index of non-manufacturing activity jumped about five points to reach 54.5 in January, which marks the highest level since May 2010 and outpaced expectations for a modest rise. The gain notably brought the index back above the 50-point marker indicating expansion.
The positive data was tempered by a sharp increase in the sub-index for input prices rose from 60.5 to 65.8, which is the highest reading in over two years and indicates that inflation will continue to put pressure on the Bank of England to balance slow economic growth and rapid price gains. Howard Archer of IHS Global Insight said the data was “markedly better than expected,” and confirmed for him that the weak December reading was “weather-related.” Archer forecast that the rebound in services suggested that the overall economy would likely have the strength to bounce back to growth in the first quarter of 2011 after contracting at the end of last year.