The U.S. services sector expanded at a faster pace in May as the non-manufacturing business activity composite index was 54.6, up from 52.8 in April on a seasonally adjusted basis, the Institute for Supply Management reported Friday.

Economists had expected a 54.0 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, dipped to 69.6 from 70.1. The employment index increased to 54.0 from 51.9.

The business activity-production index slipped to 53.6 from 53.7, the new orders index rose to 56.8 from 52.7, the backlog of orders dipped to 55.0 from 55.5, new export orders increased to 57.0 from 53.5, inventories fell to 55.0 from 55.5, the supplier deliveries index grew to 54.0 from 53.0, and imports decreased to 50.5 from 57.0.

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