The U.S. services sector, which includes diverse industries like construction and education, expanded in March for the 27th consecutive month, but the pace of growth declined on slower growth in new orders and business activity.

The Tempe, Ariz.-based Institute for Supply Management's index of the nation's non-manufacturing sector -- which accounts for about 90 percent of its economic activity -- fell to 56 in March compared with 57.3 in February and the 56.8 consensus of economists polled by Bloomberg News.

The report, released Wednesday, indicated continued growth at a slower rate in the non-manufacturing sector, said ISM chair Anthony Nieves in a press release, as readings above 50 show expansion.

Nieves added that while business and consumer confidence level has increased, there are lingering concerns about cost pressure and volatile fuel prices.

The ISM survey revealed accelerating growth in imports, inventories and employment, slowing growth in business activity, new orders, prices and new exports orders and contraction in backlog of orders.

Sixteen services industries surveyed by ISM - including real estate, finance and transportation - reported growth in March. Two, mining and agriculture, reported contraction.

The service sector is still expanding. We've had fairly healthy retail sales, fairly healthy construction and auto sales, Robert Dye, chief economist at Comerica Inc. in Dallas told Bloomberg prior to the release of the ISM report.

One ISM survey respondent said service sector growth reflects a more confident consumer.

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, said a survey participant in the arts, entertainment and recreation industry.