The services sector grew slightly more than expected in July, with new orders and employment rising in the latest month, according to an industry report released on Wednesday.

The Institute for Supply Management said its services index rose to 54.3 from 53.8 in June, above the 53.0 median forecast of 71 economists surveyed by Reuters.

A reading above 50 indicates expansion in the sector.

The report's employment component rose to 50.9 from 49.7, only the second time since December 2007 the reading went above 50. The reading for new orders rose to 56.7 from 54.4.

U.S. stocks <.SPX> briefly added to gains after the report, then turned negative. U.S. Treasuries extended losses, while the dollar <.DXY> reversed earlier losses to hit a session high against the yen.

The headline number was a positive, so it looks as though the service sector picked up a bit of speed in July. On the other hand, we see that the backlog of orders dropped back down ... it's very divided in the report, said Lindsey Piegza, economist at FTN Financial in New York.

The reading for backlog orders dipped to 52.0 from 55.5 in June.

The U.S. economy is recovering from its worst downturn since the 1930s, but weak data in recent months has stirred fears about the strength of the rebound.

Another report showed on Wednesday that Britain's services industry grew at its slowest rate in 13 months.

(Reporting by Caroline Valetkevitch; editing by Jeffrey Benkoe)

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