The U.S. services sector expanded at a slightly quicker pace in July as the non-manufacturing business activity composite index was 52.6 in the month, compared to 52.1 in June, on a seasonally adjusted basis, the Institute for Supply Management reported Friday.

Economists polled by Thomson Reuters had expected a 52.1 level.

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion.

The prices paid index, closely watched for signs of inflation, rose to 54.9 from 48.9.

The employment index decreased to 49.3 from 52.3.

The business activity/production index surged to 57.2 from 51.7, the new orders index was at 54.3, up from 53.3; backlog of orders declined to 44.5 from 47.5; new export orders grew to 51.0 from 49.5; inventories rose to 54.5 from 53.0; inventory sentiment slipped to 59.0 from 64.5; the supplier deliveries index decreased to 49.5 from 51.0; and imports dropped to 44.5 from 53.5.

Members' general comments on business in the month included:

"The general economy and unemployment are keeping our business flat." (Health Care & Social Assistance)

"Beginning to see effects of slowing economy. New orders are down versus same time last year." (Information)

"Business is slowing; input costs are weakening." (Agriculture, Forestry, Fishing & Hunting)

"Seeing a slight uptick in sales revenue." (Public Administration)

"Things have not changed too much this past month; however, we are seeing more aggressive marketing/sales efforts by suppliers hungry for business." (Transportation & Warehousing)

"Overall, we are still seeing growth over last year, but the sequential growth has gone flat to negative." (Wholesale Trade)

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