TAIPEI, Feb. 2-- Manufacturing activity continued to improve in Taiwan in January while the service sector also posted a better reading in the first month of 2015, according to a report by the Chung-hua Institution for Economic Research (CIER).

Taiwan's manufacturing purchasing managers' index (PMI), a key measure of factory activity, stood at 53.5 in January, up 3.4 percentage points from December, showed the report.

A reading above 50 indicates expansion, while a reading below 50 represents contraction.

The PMI reading has been in expansion territory for two consecutive months in Taiwan, boosted by new orders and better output data.

Meanwhile, Taiwan's service sector, which contributes about 70 percent to its nominal gross domestic product, has expanded for six consecutive months, as suggested by the CIER non-manufacturing index (NMI).

The NMI stood at 53.9 in January, compared with 53.6 in December.

Another private survey by HSBC also indicated manufacturing operating conditions strengthened modestly in the first month, with output, new orders and employment levels all rising at the start of 2015.

The HSBC Taiwan PMI posted 51.7 in January, signaling a moderate improvement in the health of the sector, compared with 50.0 in December, which is consistent with a stagnation of operating conditions.

John Zhu, an economist at HSBC in Asia, said Taiwan's manufacturing sector rebounded in January, with output and new orders both returning to growth after falling in December.

"The sharp reduction in inventories and rise in backlogs of work also suggest growth momentum will pick up in the months ahead," Zhu said.

An upturn in client demand contributed to the quickest reduction in stocks of finished goods since June 2009, while goods producers also saw the sharpest reduction in average input costs for six years, according to the HSBC PMI reading, commenting on the Taiwan manufacturing PMI survey.