* UK Sept services PMI rises to 55.3 from 54.1, two-yr high
* Expectations component rises to two-and-a-half year high
* New business component highest since February 2008
* Economists say survey more evidence recession ended in Q3
(Adds economist and market reaction)
By David Milliken
LONDON, Oct 5 (Reuters) - Britain's service sector expanded at its fastest pace for two years in September, and firms were more optimistic about the next 12 months than at any time since April 2007, purchasing managers' data showed on Monday.
The data suggested Britain's economy returned to modest growth in the third quarter of the year, but spare capacity in the sector and weaker performance in similar manufacturing and construction surveys meant the recovery was likely to be weak, survey compilers Markit said.
Nonetheless, economists said the main message from the data was upbeat, and likely to reinforce the Bank of England's belief that its quantitative easing policy was bearing fruit.
"It's a steady upward momentum, and consistent with the economy pulling out of recession in the second half of the year, probably in Q3," said Alan Clarke, UK economist at BNP Paribas.
"I've estimated that the PMI surveys are roughly 5 points stronger than they would have been without QE. This survey reinforces that view," Clarke added.
The headline PMI number rose to 55.3 in September from August's 54.1, its fifth successive month above the 50-level that divides growth and contraction and above economists' forecasts of a rise to 54.5, the data from Markit and the Chartered Institute of Purchasing and Supply showed.
But despite the better-than-expected data, market reaction was muted with December gilt futures only a fraction weaker than beforehand.
The PMI expectations index rose to 75.0 from 72.3, with firms citing a better economic backdrop, more new business enquiries and plans to increase advertising.
Hotels, restaurants and business-to-business service companies reported particularly strong growth, while activity fell in the transport, storage and communication and personal services sectors, Markit said.
An improving economic climate helped new orders rise at the quickest rate in 19 months, but job losses continued for a 17th successive month, and at a faster pace than in August.
"With households and businesses continuing to rebuild their balance sheets, and the positive effects of loose fiscal and monetary policy likely to fade, the scenario of an anaemic growth path remains the best forecast at the present time," said Paul Smith, senior economist at Markit.
There was other evidence of slack in the sector too. Average prices charged continued to drop, increasing the period of deflation to 11 months, and levels of outstanding business also fell further, extending the longest unbroken decline in the survey's history to two years.
"We continue to have our doubts about how strong any further recovery will be," said Vicky Redwood from Capital Economics.
She estimated the services survye pointed to growth of 0.3-0.4 percent in the economy as a whole in the third quarter.
"However, the official data has recently come out rather weaker than the surveys suggested, so a smaller rise than this is probably likely," she added. (Reporting by David Milliken; Editing by Andy Bruce)