The U.S. services sector expanded at a slightly slower pace in March as the non-manufacturing business activity composite index was 54.4 in the month, compared to 56.0 in February, on a seasonally adjusted basis, the Institute for Supply Management reported Tuesday.

Economists polled by Thomson Reuters had expected a 55.8 level.

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

The prices paid index slid to 55.9 from 61.7.

The employment index decreased to 53.3 from 57.2.

The business activity/production index dipped to 56.5 from 56.9, the new orders index was at 54.6, down from 58.2; backlog of orders remained at 54.5; new export orders fell to 56.5 from 60.5; inventories dropped to 51.5 from 54.0; inventory sentiment slid to 59.5 from 62.5; the supplier deliveries index gained to 53.0 from 51.5; and imports jumped to 57.5 from 52.5.

Members' general comments on business in the month included:

"The economy and our business appear to be improving." (Management of Companies & Support Services)

"Volumes are down slightly, but spending per person is up." (Arts, Entertainment & Recreation)

"Economy and all of our business units appear to be on track for positive gains this year. It may be a struggle, but economic indicators and signs of business growth point to increased spending from our customers." (Professional, Scientific & Technical Services)

"Local business climate seems more upbeat as the market moves higher." (Public Administration)

"Winter weather has affected construction, but the spring building season looks encouraging." (Wholesale Trade)

"Sales increased 17 percent last year; sales continue to rise this quarter." (Retail Trade)

"Anticipate a plentiful season, requiring strategic planning with packaging inventories." (Agriculture, Forestry, Fishing & Hunting)

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