Strong demand boosts US services sector activity in August

WASHINGTON, Sept 3 (Reuters) - U.S. services sector activity picked up in August as strong demand lifted new orders to a 3-1/2-year high and drove input prices higher, suggesting inflation could remain elevated and compel the Federal Reserve to hike interest rates before the end of this year.

The Institute for Supply Management said on Thursday its nonmanufacturing Purchasing Managers' Index advanced to 55.4 last month from 54.1 in July. A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists polled by Reuters had forecast the PMI would climb to 54.2. The current PMI level is consistent with solid economic growth in the third quarter.

A Reuters survey of economists expects the Labor Department on Friday to report that payrolls rebounded by 56,000 jobs last month after a surprise decline of 23,000 in July. That rebound would partly reflect a recovery in local government education payrolls. Some economists are, however, bracing for a second straight month of job losses after Temporary Protected Status for hundreds of thousands of Haitians recently ended, impacting their work authorization.