British employers expanded their permanent workforce for the first time in four months in January, a survey of recruitment agencies said on Wednesday, adding to signs that the economy may be improving.

The Recruitment and Employment Confederation (REC) said their monthly index of permanent staff placements rose to 51.2 from 48.5, the first reading above the 50 line separating growth from contraction since September.

There are glimmers of hope for the UK jobs market, said REC chief executive Kevin Green. The Report on Jobs also follows better than expected services data from the Purchasing Managers' Index last Friday, which suggests that confidence is growing amongst consumers as well as businesses.

Britain's dominant services sector grew at the fastest pace in 10 months in January and employment in the sector rose at the sharpest rate in almost four years, the Markit/CIPS Purchasing Managers' Index showed last week.

High unemployment, government austerity measures and below-inflation wage growth have been weighing on consumer morale, forcing them to cut spending - a vital component of the British economy.

Despite signs that the economy may be turning the corner after contracting in the last quarter of 2011, the Bank of England looks set to plough on with one more round of quantitative easing this week to support the economy.

But in further positive news for hard-pressed Britons, the British Retail Consortium said on Wednesday that shop prices rose at their slowest pace in almost two years in January.

The REC report, which is also sponsored by accountants KPMG, showed that overall demand for staff rose, albeit at the weakest pace in more than two years, with engineering and construction workers the most sought after.

Companies' spending on temporary staff fell modestly in January after contracting in December for the first time in more than two years.

According to the latest official data, unemployment in Britain - which rose relatively little during the 2008-09 recession - climbed to its highest level in more than 17 years in the three months to November.

However, a much smaller than expected number of new benefit claims in December provided some hope that the labour market downturn may be levelling out.

(Reporting by Olesya Dmitracova, additional reporting by Fiona Shaikh; Editing by Hugh Lawson)