updated 4/5/2006 12:17:10 PM ET 2006-04-05T16:17:10

The services sector of the nation’s economy expanded in March at a faster rate than in the previous month, a private research group said Wednesday. The growth outpaced analysts’ forecasts.

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The Institute for Supply Management said that its index for non-manufacturing business activity stood at 60.5 in March, up from 60.1 in February. The reading was higher than the 59.0 that analysts had been expecting.

A reading above 50 indicates the sector is expanding; below 50 indicates activity is contracting. The index is based on a survey of business executives.

The report was the latest sign of strength in the economy and suggests that interest rates could continue to rise. Last month the Federal Reserve disappointed investors by indicating that its credit-tightening could continue further than some had forecast, with at least one and perhaps two more increases in its benchmark short-term interest rate.

Ralph G. Kauffman, chairman of the ISM’s survey committee, said that the latest report showed increases in 13 of the 17 non-manufacturing sectors of the economy, up from 10 that reported increases in February.

March was the 36th consecutive month of expansion in the services sector of the economy, a broad area that includes financial services such as banking and insurance as well as restaurants and communications.

Kauffman said in a statement that while prices were still a cause of concern among many in the services economy, “the overall indication in March is continued economic growth in the non-manufacturing sector.”

The report did little to move the yield on the 10-year Treasury note, which was already down slightly ahead of the release of the data. Just after the data came out, the yield was 4.84 percent, down from 4.87 percent late Tuesday. Bond investors are also looking ahead to another key economic indicator due out Friday, non-farm payrolls for March.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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