The UK economy continues to recover at a “rapid pace” despite growth in the dominant services sector slipping to a seven-month low last month.
The headline reading of 58.3 in the closely watched Markit/CIPS purchasing managers’ index (PMI) came in below expectations but was still well ahead of the level of 50 that separates growth from contraction.
Experts say that bodes well for future jobs and as demand increases, the pressure on wages to rise looks set to grow.
With record rainfall likely to have impacted on last month’s result, business optimism about future prospects stood at its highest in four years.
This led companies to maintain their recent recruitment drives, with overall employment levels rising for the thirteenth month in a row, the survey said.
The latest report means overall growth in the sector, which represents three-quarters of the economy and has led the UK out of recession, has fallen for three months in a row. It stood at 58.8 in December.
Markit chief economist Chris Williamson said it was important to remember that growth had been exceptionally strong in previous months.
He said: “The service sector saw another month of strong growth in January, suggesting that the UK economy continues to recover at a rapid pace.”
Mr Williamson added that accompanying readings from the manufacturing and construction sectors pointed to another strong quarter for GDP.
The UK expanded by 0.7 per cent in the final quarter of the year, with economists currently predicting an annual improvement of up to three per cent for 2014.
Employers will be pressed to increase pay this year amid a rise in vacancies, coupled with skills shortages, according to a new report.
Employment firm Reed said vacancies on its website have increased by almost a third over the past year to stand at over 160,000.
Wage rates have remained “largely stagnant” and have fallen in some regions, but Reed said this was likely to change.
Chairman James Reed said: “While employers have gone out of their way to hold on to valued staff during the downturn, the improving economic situation is creating a new set of pressures on pay.
“A wider choice of opportunities is giving candidates a renewed confidence, whilst skills shortages are becoming ever more apparent.”