By Joshua Jamerson

Activity in the U.S. service sector expanded in January, according to a report Friday that also said business confidence was at the highest level in nearly two years.

Markit Economics' U.S. services business activity index rose to 55.6 in January from 53.9 in December, which was a three-month low. Readings above 50 indicate expansion.

The January report suggested a robust increase in new work in the sector, and anecdotal evidence linked that boost to higher levels of business and consumer spending at the start of the year.

Chris Williamson, chief business economist at IHS Markit, said the January services survey and a manufacturing survey released recently signal annualized GDP growth of about 2.5%, "setting the scene for a solid first quarter.""With January seeing the largest inflow of new business for 18 months, there's good reason to believe that firms will be even busier in coming months," Mr. Williamson said.

Looking ahead, firms indicated another rise in business optimism regarding growth over the next 12 months. The report said it was the highest level of business confidence since May 2015.

Write to Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

February 03, 2017 10:49 ET (15:49 GMT)

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