Signaling continued weakness in the service sector, the Institute for Supply Management said Friday that its non-manufacturing index unexpectedly fell in March and indicated the sixth consecutive month of contraction in the sector.

The ISM said its non-manufacturing index fell to 40.8 in March from 41.6 in February, with a reading below 50 indicating a contraction in the service sector. The decrease came as a surprise to economists, who had expected the index to edge up to 42.0.

Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee said, Respondents remain concerned about the negative economic outlook and rising unemployment.

The unexpected decrease by the index was partly due to an acceleration in the pace of contraction in new orders, with the new orders index falling to 38.8 in March from 40.7 in February.

Employment in the service sector also contracted as a faster pace than in the previous month, as the employment index fell to 32.3 from 37.3.

The Labor Department's employment report released earlier in the day showed that the service-providing sector lost 358,000 jobs in March following a decrease of 366,000 jobs in February.

Additionally, the ISM said that the prices index fell to 39.1 in March from 48.1 in February, indicating a notable acceleration in the decline in prices.

Nieves added, A special question was asked with regard to the Economic Stimulus Package, and eight of the 18 industries expect to derive some benefit from the stimulus.

On Wednesday, the ISM released a separate report showing that it index of activity in the manufacturing edged up to 36.3 in March from 35.8 in February. Economists had been expecting the index to come in at 36.0.

While the index indicated a continued contraction, Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee said, The rapid decline in manufacturing appears to have moderated somewhat, as the PMI remains in the mid-30s for a third consecutive month.

The manufacturing survey also included a special question with regard to the Economic Stimulus Package, with five of the 18 manufacturing industries expected to derive some benefit from the stimulus.

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