The U.S. service sector expanded at a slightly faster pace in August, but growth was spotty and prices paid for raw materials shot up, according to a survey of senior executives, MarketWatch reported.

The Institute for Supply Management (ISM) said today that its service index rose to 53.3 percent in August from 52.7 percent in July. Economists surveyed by MarketWatch expected the index to fall to 51.0 percent.

Though readings over 50 percent indicate more firms are expanding than contracting, the index is still well below its recent peak of 59.7 percent in February.

“There is a degree of uncertainty concerning business conditions for the balance of the year,” said Anthony Nieves, who directs the ISM service survey.

The U.S. service sector employs about four of every five workers and accounts for three-fourths of all economic activity. The ISM report is one of the few indicators in recent weeks to show some improvement in the U.S. economy, MarketWatch said.

Markets mostly ignored the report amid concerns about a potential European debt crisis and a global economic slowdown following a poor U.S. employment report on Sept. 2. The Dow Jones industrial average was down nearly 300 points at one point today.

The new-orders portion of the ISM service index rose 1.1 percentage points to 52.8 percent, bouncing off a two-year low. And the backlog of orders index climbed 3.5 percentage points to 47.5 percent, the first increase in five months.

The prices index jumped 7.6 percentage points to 64.2 percent, reflecting the high costs that companies continue to pay for raw materials or service integral to their own businesses, MarketWatch said.