Activity in the country's services sector is at its highest level since 2007, a new survey shows. 

The Investec Services Purchasing Managers' index has now shown expansion in each of the last 17 months. 

The index, which covers businesses from banks to hotels and accounts for 70% of economic output, moved up to 61.8 in December, its highest since February 2007. The index had stood at 57.1 in November

The December PMI shows particularly strong growth in employment and new export orders. The rate of job creation picked up to the fastest pace in five months and employment has now risen for 16 months in a row. 

New business from abroad rose at the fastest pace in 11 months, with companies pointing to the UK as the main source of new export orders.

Today's survey shows that increased staff costs and higher energy prices contributed to a rise in input costs last month, with the rate of inflation at the highest level since August. But companies continued to lower their output prices, although the pace of reduction was the lowest in 10 months.

Investec's chief economist Philip O'Sullivan said that there is much to be optimistic about in the survey. 

"The pace of growth in new business quickened for a third successive month during December, with respondents citing strengthening economic conditions and improved client confidence, " he said. 

"Unadjusted data for the subsectors covered by the survey - Business Services, Financial Services, Technology, Media and Telecoms and Travel & Leisure - show that for a fifth successive month all segments reported growth in new business. Fuelled by this improved demand, backlogs of work are growing at the fastest pace since March 2007," he added.