Hiring at a Walgreens store in San Francisco, California earlier this year
Hiring at a Walgreens store in San Francisco, California earlier this year GETTY IMAGES NORTH AMERICA / JUSTIN SULLIVAN

The American service sector, the prime driver of the world's largest economy, rebounded in August, easing worries of a steady slowdown, according to a business survey released Thursday.

The unexpectedly strong August jump rebounded from July's three-year low but still contained signs of weakness.

After falling for two months, the Institute for Supply Management's monthly non-manufacturing index leapt 2.7 points to a reading of 56.4, overshooting economists' expectations and hitting its highest level since May.

The result was still below the average for the year. Any reading above 50 indicates growth.

The trade war, which deteriorated sharply in August, has been far harder on the smaller US manufacturing sector, causing it to contract last month for the first time in three years, according to ISM.

Anthony Nieves, chair of ISM's services sector survey, told reporters there were persistent concerns among companies about a slowdown in the US economy and the escalating US-China trade war.

He also said successive waves of tariff increases planned by President Donald Trump through the end of the year should hit consumer products, which could affect the service sector more directly.

"It hasn't hit them yet. I think September, October will be the tell-tale sign," he said.

Wholesale trade was the only services industry to report contraction in August, while 16 others grew.

According to the report, companies reported stronger production and rising levels of new orders.

But employment activity, imports and new export orders slowed notably while order backlogs -- a sign of future activity -- dropped 4.5 points to a reading of 49, marking contraction.

Ian Shepherdson of Pantheon Macroeconomics said that, given the recent strength of retail sales, "under normal circumstances we would have expected a much higher number."

In a note to clients, he said the ISM survey had fallen short of expectations set by retail sales for three straight months, meaning the August report was "not as good as it looks."