Tom Davies insists Everton are still “going in the right direction” despite suffering a New Year’s Day “setback” at Manchester City.

Midfielder Davies, who started for the second successive game after being drafted in shortly before kick-off to replace the injured Bernard, conceded his side took too long to hit their stride against Pep Guardiola’s team.

City had the majority of possession and more shots at goal but Everton roared back after two Gabriel Jesus strikes put the hosts 2-0 in front with 58 minutes on the clock.

Richarlison slammed home with 19 minutes remaining to slice City’s advantage in half but despite a late rally Everton’s five-match unbeaten Premier League run came to an end.

“We are going in the right direction, even today we weren’t at our best but the lads showed great spirit to keep going towards the end and not let the game get away from us,” said Davies.

“We were more aggressive [later in the game] and creating chances – but overall we weren’t at our best and are disappointed with how it has gone.

“It was a difficult game and Manchester City are a very good team.

“They were good today but we could have done more.

“We still had opportunities towards the end and could have got an equaliser – but if we’d done that [pressured City] all game we’d have had a better chance of taking something.”

Manager Carlo Ancelotti won his first two games in charge – against Burnley on Boxing Day and two days later at Newcastle United – but saw his hopes of a third successive victory dented during seven damaging second-half minutes.

Brazilian Jesus opened the scoring on 51 minutes after being threaded in by Ilkay Gundogan.

Riyad Mahrez passed to Jesus for the striker to net his second and leave Everton staring down the barrel at the home of the Premier League champions.

Ancelotti responded by introducing attacking pair Theo Walcott and Moise Kean and both substitutes had a hand in Richarlison’s ninth goal of the campaign.

Kean scissor-kicked wide from a Djibril Sidibe delivery as Everton grew in confidence – albeit City retained a significant threat and Jesus was the width of a post from bagging a hat-trick – but the visitors' resurgence ultimately arrived too late to glean tangible reward.

Davies was originally one of five of the starters from Saturday’s win at Newcastle to make way for the meeting with City.

He received an eleventh-hour promotion, however, after Bernard was hurt during the warm-up.

“It is unusual but you have to prepare as if you could play,” added Davies.

“I was ready to come in and just happy to be on the pitch and playing.

“Carlo has been brilliant and him and his staff have really helped us in the games.

“Today is a setback – but we have been in good form.

“We are all looking forward to the rest of the season and trying to get on a run.

“We are looking good. We have to listen to him [Ancelotti] and improve and go on and win more games… and start to pick up points in these sorts of games.”