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U.S. service sector growth hits 10-month high

A Wal-Mart employee pushes a line of shopping carts toward the entrance of a Wal-Mart store, in Walpole, Mass., in this May 11, 2007 file photo. Growth in the U.S. service sector slowed in March.

Steven Senne/AP

The vast U.S. services sector grew at its fastest clip in 10 months in December, boosted by a rise in new orders, according to an industry report released on Friday.

The Institute for Supply Management said its services index rose to 56.1 last month from 54.7 in November. The December reading was the highest since February and was well above economists' forecasts of 54.2, according to a Reuters poll.

A reading above 50 indicates expansion in the sector.

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New orders rose for a second straight month, with the sub-index hitting a 10-month high of 59.3 in December after 58.1 the prior month. Hiring in the sector also picked up, with the employment index jumping to 56.3 - the highest since March - from 50.3 in November.

U.S. government bonds slipped after the stronger-than-expected report while Wall Street held slight gains seen after a separate report showed the economy added 155,000 jobs last month, close to estimates by economists.

"Overall a good number, especially when combined with the wage improvement in the jobs report," said Joseph Trevisani, chief market strategist at WorldWideMarkets in Woodcliff Lake, New Jersey.

The ISM survey's business activity index slipped to 60.3 from 61.2 while prices paid fell to 56.6, the lowest in five months, from 57.0.

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