Preliminary data released by IHS Markit on Friday pointed to a faster expansion in business activity in January, which was driven by a sharper increase in the service sector output, while the growth of manufacturing production was unchanged.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) came in at 51.7 in January, slightly down from 52.4 in December. That was the lowest value since last October. Economists had expected the reading to edge up to 52.5. A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. According to the report, new business growth was only marginal in January, while output continued to rise at a moderate pace and employment increased at the slowest pace for four months.

Meanwhile, the Markit flash services purchasing manager's index (PMI) climbed to 53.2 this month, from 52.8 in the prior month. The latest reading was the highest one since last March. Economists had expected the reading to increase to 52.9. According to the report, employment increased at a quicker rate and business optimism reached a seven-month high, but the expansion in new orders moderated slightly.

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 53.1 in January, up from 52.7 in December, signaling the quickest rise in output since last March.

Commenting on the flash PMI data, Siân Jones, an economist at IHS Markit, noted: "The recovery of growth momentum across the U.S. private sector continued to quicken at the start of 2020, with overall output rising at the sharpest pace since last March. Nonetheless, the underlying data highlights a manufacturing sector that is not out of the woods yet, with goods producers seeing only modest gains in output and new orders. Service providers also registered a slower upturn in new business, which fed through to softer increases in output charges as part of efforts to attract new customers."