NEW YORK (CNN/Money) - Growth in the U.S. service sector accelerated in January, the nation's purchasing managers said Wednesday, beating analysts' expectations.
The Institute for Supply Management's index of non-manufacturing activity came in at 65.7, compared with a revised 58 in December. Any reading above 50 indicates growth in the sector.
It was the highest reading for the index since the ISM started keeping track of service-sector activity in July 1997. Economists, on average, expected a reading of 60, according to Briefing.com.
Separately, the Commerce Department said factory orders surged in December, another report that beat forecasts. Both the ISM services index and factory orders posted surprising declines last month.
The reports were of little help to U.S. stock prices, which continued to fall in early trading. Treasury bond prices also fell.
The service sector is the economy's biggest employer, and service activity -- including banking, tourism, entertainment and more -- makes up about 80 percent of the total economy.
While Wednesday's report from the ISM indicates consumers have continued to spend on services at a healthy pace, not all of the details in the report were moving in the same direction.
For example, while the ISM's "new orders" index rose to 64.9 from 59.5 in December, its "backlog of orders" index fell to 53.5 from 55.5 in December. While the "supplier deliveries" index rose to 56.5 from 52, hinting at a surge in activity, the "prices paid" index slipped to 59.7 from 60.3, perhaps indicating a decline in demand for service-sector supplies.
More worrisome was a decline in the employment index to 53.4 from 54 in December, the second straight monthly deceleration. The ISM said the entertainment, transportation, and wholesale trade industries hired in January, while insurance, construction, retail trade and health services firms cut jobs.
On Friday, the Labor Department is scheduled to release its report on payroll growth and unemployment in January. Economists, on average, expect payrolls to have grown by 165,000 jobs and unemployment to remain at 5.7 percent, according to Briefing.com.