NEW YORK, Feb 5: The US services sector, which accounts for the bulk of the overall economy, expanded for the 12th straight month in January, a report said on Wednesday.

In a fresh indication that the services industry is marching ahead but at a modest clip, the Institute for Supply Management said its index of non-manufacturing business rose to 54.5 in January from a revised reading of 54.2 in December.

A number above 50 denotes expansion while a reading below 50 shows contraction. The sector encompasses a vast array of businesses including banking, restaurants and entertainment.

The report elicited little market reaction, since Wall Street analysts’ 54.6 consensus forecast was just off the mark. The employment index broke above 50 for the first time since February 2001, rising to 50.3 from 46.9 in December.

“It’s particularly encouraging there were even larger increases in the employment and new orders component, though I would caution the employment index has not correlated well with payrolls,” said Jade Zelnik, chief economist at RBS Greenwich Capital Markets.

The report is consistent with the view that the economy is unlikely to slip back into recession, Zelnik added.

More prominent on investors’ minds was US Secretary of State Colin Powell’s speech to the United Nations Security Council Wednesday morning, where he is expected to present what the government says is new evidence that Iraq is manufacturing banned weapons.—Reuters