UK service sector rebounds in January

Waitress and diners
Image caption Hotels and restaurants contributed the biggest boost to the service sector

Output from the UK services sector rebounded sharply in January, suggesting the economy made a stronger start to the year, figures show.

Output rose by 1.3% from the previous month, compared with a contraction of 1.1% in December, the Office for National Statistics (ONS) said.

All components that make up the sector saw rises in output.

Figures released on Tuesday showed that the UK economy shrank by 0.5% in the final three months of 2010.

This was slightly less than the previous estimate of 0.6%.

Hotels and restaurants gave the biggest boost to the services sector, with output rising 4.4% on the previous month, the ONS said in its report.

Transport, storage and communication saw output increase 1.7%, while business and financial services rose by 1.4%.

'Weak recovery'

Analysts said the service sector figures suggested the economy would be stronger in the current quarter.

"Given the dominant role of the services sector, this is a significant boost to hopes that the economy has achieved a decent bounce back in growth," said Howard Archer at IHS Global Insight.

"We currently forecast GDP to grow by 0.7% in the first quarter."

However, some observers were less convinced of the impact an upturn in services in January would have on the overall economy.

"The level of activity is flat - the same as six months ago, so the state of the recovery is pretty weak," said Samuel Tombs at Capital Economics.

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