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Italy's service sector returns to growth in January: PMI

[ROME] Italy's service sector returned to growth in January but new business and employment dropped, suggesting companies are still struggling as the economy goes through its third recession in six years.

The Markit/ADACI Business Activity Index for services companies, released on Wednesday, rebounded to 51.2 in January from 49.4 in December, back above the 50 mark denoting growth after a month of contraction. "January saw business activity at service providers rebound after dipping slightly at the end of last year, though on closer inspection the data weren't so encouraging," said Markit economist Phil Smith, who compiled the survey.

The index rose due to a sharp increase in business expectations. Companies said they were more optimistic in January than at any time since last July.

The new business sub-index dropped to 48.8 in January from 49.3 in December, its fastest decline since November 2013. Businesses responded to weak demand by laying off staff at their fastest rate in nine months.

Rising layoffs in the services sector contrasted with data released last week that showed a sharp fall in unemployment in the country overall.

The services PMI painted a brighter picture than its sister survey of manufacturers, which showed activity remaining in contraction for the fourth month in a row in January.

Markit's composite PMI for services and manufacturing rose at exactly the same rate as the index for services companies, slipping to 51.2 from 49.4.