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WASHINGTON (AFP) April 5- The massive US services sector raced to a record production speed in March, expanding for the 12th straight month on a broad front and churning out new jobs, a survey showed.

The Institute for Supply Management (ISM) said its index of non-manufacturing activity, based on a survey of top executives, leapt 5.0 points from the previous month to 65.8. Any figure above 50 points indicates an expansion in activity.

The surge, which easily beat private economists' expectations, took the services sector index to the highest level since the ISM survey began in July 1997.

"It is a very encouraging report, indicating that the economy is moving forward and upward," said Wells Fargo Banks chief economist Sung Won Sohn.

"All the pistons in the engine are firing," he said.

"This will pull manufacturing forward as well."

The survey appeared to confirm widespread growth in the economy, already indicated by Friday's official employment report, which showed a four-year record creation of 308,000 new jobs in March.

It followed a similar ISM survey of the manufacturing sector last week, which indicated factories boosted activity for the 10th straight month in March and accelerated hiring.

The services sector is more critical because it accounts for four-fifths of the world's biggest economy.

Service sector firms added new jobs for the sixth straight month, the latest survey showed, with the employment index up 1.2 points to 53.9.

"Hopefully employment will continue to rise but there are some long-term structural issues, which may hold back jobs," Sohn said, pointing to pressure on profit margins from US and foreign competitors, and the high cost of US health care.

A breakdown of the services sector survey showed:

-- New orders sped up, with the index rising 2.5 points to 62.8.

-- The backlog of orders grew, albeit at a slower pace, with the index easing 0.5 point to 52.5.

-- New export orders growth decelerated, with the index falling 4.0 points to 51.5.

-- But prices paid by services firms jumped, with the index surging 8.4 points to 65.7.

"These positive ISM service figures -- combined with the impressive employment numbers we saw last Friday -- provide further evidence that the economy is warming up, and could be ready to sizzle," said Wachovia Securities economist Jason Schenker.

The news boosted Wall Street. The Dow Jones industrials index of 30 top stocks finished 87.78 points or 0.84 percent higher at 10,558.37.

Comments provided to the survey by services sector executives showed optimism, tinged with some caution, particularly in view of shortages of raw materials such as steel.

The comments included: "The general economy seems to be picking up," "Economy still struggles somewhat," and "Volatile fuel and steel prices continue to give concern to recovery that is said to be in progress."

The survey reported steel and steel products in short supply. Prices surged for a slew of materials from aluminum to chicken, coffee, computers, diesel fuel and freight charges.

A separate survey of US chief executives' confidence in the US economy hit a 20-year high in the first quarter of 2004, according to a private research group, the Conference Board (news - web sites).

The board's index of corporate chiefs' confidence in the current economy surged seven points from the previous quarter to 73 points, the highest since late 1983, and a barometer of confidence in the economic outlook in six months soared 10 points to 78.

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