Economists polled by Thomson Reuters expected a reading of 48; anything below 50 indicates the service sector is shrinking.
The survey of purchasing executives in 18 industries tracks more than 80 percent of the country's economic activity. It covers indicators such as new orders, employment, business activity and inventories.
Business activity grew last month for the first time since last September, while measures tracking new orders and employment also improved from July.
Still, only six sectors reported growth. Consumer spending, the key to a strong recovery because it accounts for 70 percent of economic activity, remained subdued.
Real estate, health care and social assistance, and transportation and warehousing were the biggest gainers in the ISM survey. The 12 other industries contracted, led by companies that offer management and support services to other businesses.
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