SERVICE SECTOR jobs were lost at a record rate in January as the sector contracted for a 12th successive month.

The NCB Purchasing Managers Index (PMI) survey of services companies – ranging from banks to transport firms – fell to 33.9. Any reading below 50 indicates contraction and January’s was the second lowest on record, after November 2008.

Roughly 40 per cent of service companies that responded to the survey said that they had reduced their staffing levels in January.

Close to 35 per cent of respondents said that they had lowered their prices in an attempt to stimulate demand for their services and at the request of clients, and also in response to increased competition.

However, this strategy failed to reignite demand. Instead, the combination of falling sales and price cuts meant that profitability in the sector experienced a steep fall.

For the first time in the history of the survey, input prices fell in January. This price deflation was attributed to a reduction in salaries and lower fuel costs. The relative weakness of sterling against the euro also made some UK inputs cheaper.

The services sector as a whole experienced a substantial decline in new business last month, but the fall was most marked among transport and leisure companies.

Data out yesterday showed that deterioration in the euro zone’s services sector slowed slightly in January, but still remained deeper than expected, showing the 16-nation bloc remains in the clutches of recession.

The slight uptick in the Markit euro zone services sector index for January is the first rise since August, even though it marks the eighth month the index has been below the 50 mark that divides growth from contraction.

The fourth quarter of 2008 was likely the deepest part of the contraction in the current downturn, forecasters in a Reuters poll said last month, although the bloc will not emerge from recession until at least the second half of 2009. – (Additional reporting: Reuters)