The Institute for Supply Management said Monday that its service index hit 50.9 last month, up from 48.4 in August. Analysts polled by Thomson Reuters had expected a reading of 50, the dividing line between growth and contraction.

The index, which tracks more than 80 per cent of the country's economic activity, including hospitals, retailers, financial services companies and truckers, hadn't grown since August 2008.

The good news:

The new orders index, an indicator of future activity, jumped to 54.2 in September from 49.9 a month before the first growth reading in a year.

Businesses' backlog of orders grew for the first time in 14 months.

Present business activity rose to 55.1 from 51.3 in August, growing for the second straight month after 10 straight contractions.

The ISM report is based on a survey of the institute's members in 18 industries and covers indicators such as new orders, employment and inventories.

Five industries grew last month: utilities, health care, retail, construction and wholesale trade. And while activity is rising, only three areas reported an increase in jobs: health care, support services for companies and educational services.

Overall, service-sector employment shrank in September, though at a slightly slower pace than in August. The survey's reading of 44.3, up from 43.5, was the 20th month of contraction in 21 months.

The service sector is dependent on consumer spending, which powers about 70 per cent of the economy. While Americans' spending rose 1.3 per cent in August, the best showing since October 2001, a third of that gain came from the government's now-ended Cash for Clunkers programme.

The government also reported that incomes rose only 0.2 per cent in August.