The U.S. services sector expanded at a slightly quicker pace in August as the non-manufacturing business activity composite index was 53.7 in the month, compared to 52.6 in July, on a seasonally adjusted basis, the Institute for Supply Management reported Thursday.

Economists polled by Thomson Reuters had expected a 52.5 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 64.3 from 54.9.

The employment index increased to 53.8 from 49.3.

The business activity/production index slid to 55.6 from 57.2, the new orders index was at 53.7, off from 54.3; backlog of orders increased to 50.5 from 44.5; new export orders grew to 52.0 from 51.0; inventories fell to 52.5 from 54.5; inventory sentiment surged to 67.0 from 59.0; the supplier deliveries index increased to 51.5 from 49.5; and imports climbed to 49.5 from 44.5.

Members' general comments on business in the month included:

"Markets and customers we serve remain strong and have not caused any adverse impact to our business." (Management of Companies & Support Services)

"Economy still stagnant. Small jobs keeping us going. Expect some improvement in capital spending in fourth quarter." (Professional, Scientific & Technical Services)

"Small slowdown in tourism. Commodity prices on the rise." (Arts, Entertainment & Recreation)

"Budgets are tighter; there are fewer new purchases being pursued that were not planned or budgeted." (Finance & Insurance)

"Overall conditions continue to be unpredictable. Sales are inconsistent as customers reel to the news of the day, which creates havoc on the supply chain to respond."(Retail Trade)

"Customers appear to be refocusing their resources on internal costs and efficiencies." (Wholesale Trade)

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