U.S. service sector activity slows a bit; orders hit 12-1/2-year high

WASHINGTON (Reuters) - U.S. services sector activity slowed modestly in February, held back by a sharp pull back in hiring, but a surge in new orders to a 12-1/2-year high pointed to underlying strength.

The Institute for Supply Management (ISM) said on Monday its non-manufacturing activity index slipped 0.4 point to a reading of 59.5 last month. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of U.S. economic activity.

The survey's measure of services sector employment dropped 6.6 points to 55.0, while a gauge of new orders jumped 2.1 points to the highest level since August 2005. A sub-index for export orders increased solidly last month.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)