NEW YORK – The U.S. services sector expanded at a slower pace in March as the non-manufacturing business activity composite index was 56.0 in the month, compared to 57.3 in February, on a seasonally adjusted basis, the Institute for Supply Management reported Wednesday.

Economists polled by Thomson Reuters had expected a 57.0 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, slid to 63.9 from 68.4.

The employment index increased to 56.7 from 55.7.

The business activity/production index fell to 58.9 from 62.6, the new orders index was at 58.8, off from 61.2; backlog of orders dropped to 49.5 from 53.0; new export orders fell to 52.5 from 54.5; inventories rose to 54.0 from 53.5; inventory sentiment declined to 58.5 from 61.5; the supplier deliveries index remained 49.5; and imports increased to 56.0 from 52.0.

Members' general comments on business in the month included:

"2012 continues ahead of forecasted pace through March." (Wholesale Trade)

"February was a great month for auto sales — much better than expected. Forecasted sales volumes for the year are being revised upward." (Retail Trade)

"Positive year-over-year growth is finally being seen as customers' discretionary spend is up, and overall traffic is increasing as well. Increased investments in marketing promotions and advertising during the past few months have helped improve customer loyalty, evidenced by longer stays and increased frequency of visits." (Arts, Entertainment & Recreation)

"Companies are seeking professional services to continue efficiencies while positioning for growth, when the top line comes back." (Professional, Scientific & Technical Services)

"We are starting to see the private sector building again; the money is starting to flow into construction." (Construction)

"Increasing demand for healthcare services while engaging in a more intense effort to reduce costs universally. [We are doing this] prior to implementation of healthcare reform, which is expected to dramatically reduce revenue by approximately 25 percent." (Health Care & Social Assistance)

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