The pace of growth in the U.S. services sector rose in August to its highest level since 2005, according to an industry report released on Thursday.

The Institute for Supply Management said its services index rose to 59.6 last month from 58.7 in July. The August reading was the highest since March 2005 and topped economists' forecasts for 57.5, according to a Reuters survey.

A reading above 50 indicates expansion in the sector.

Its index of business activity rose to 65.0 in August, the highest since a matching December 2004 reading. The index was at 62.4 in July.

The employment index also rose, hitting 57.1 in August, the highest since February 2006, compared with 56.0 in July. (Reporting by Caroline Valetkevitch; Editing by Meredith Mazzilli)