The U.S. services sector expanded at a slightly slower pace in January as the non-manufacturing business activity composite index was 55.2 in the month, compared to 55.7 in December, on a seasonally adjusted basis, the Institute for Supply Management reported Tuesday.

Economists polled by Thomson Reuters had expected a 55.1 level.

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

The prices paid index rose to 58.0 from 56.1.

The employment index increased to 57.5 from 55.3.

The business activity/production index slid to 56.4 from 60.8, the new orders index was at 54.4, down from 58.3; backlog of orders decreased to 49.0 from 49.5; new export orders gained to 55.5 from 49.5; inventories fell to 47.0 from 50.0; inventory sentiment soared to 64.0 from 58.0; the supplier deliveries index increased to 52.5 from 48.5; and imports jumped to 51.0 from 49.0.

Members' general comments on business in the month included:

"Sales are up slightly compared to this same period last year. This is offset by slight increases in costs for personnel benefits, fuel and other operating costs." (Public Administration)

"Business is good, but we find ourselves in a very competitive environment." (Construction)

"No change in business levels since prior month, but optimism growing that commercial and industrial construction will experience growth in 2013." (Real Estate, Rental & Leasing)

"Healthcare reform causing continued slowdown and less investment." (Health Care & Social Assistance)

"Seeing increasing prices on services and goods - some not substantiated. Business outlook continues to show small signs of improvement in parts of our business, but other parts are lagging behind." (Professional, Scientific & Technical Services)

"There seems to be some stabilization in recent months. Business seems a little more confident, and consumers are participating once again." (Retail Trade)

"Business is slightly softer than this time last year, but there are a lot of projects on the horizon which gives us confidence." (Wholesale Trade)

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