NEW YORK Tue May 27, 2014 9:56am

 The U.S. services sector expanded in May at its fastest rate since March 2012 as employment creation accelerated, an industry report showed on Tuesday.

Financial data firm Markit said its "flash" services Purchasing Managers Index hit 58.4 in May compared with April's final reading of 55.0.

A reading above 50 signals expansion in economic activity.

The services sector added employees at the fastest rate since January, with the employment subindex at 53.1, up from 51.2 last month. New  growth for the services sector was at its fastest since February 2011.

Markit's "flash" composite PMI, a weighted average of its manufacturing and services indexes, hit 58.6 in May versus a final reading of 55.6 in April, marking the fastest rate of private sector output growth since April 2010.

"May's flash services PMI survey is a further signal that the US  has regained momentum through the second quarter of the year," said Tim Moore, senior economist at Markit.

He said the survey should help alleviate concerns that the first quarter slowdown reflected underlying sluggishness in the U.S. .

The government non-farm payrolls report is due June 6 and is expected to show 215,000 new jobs were created in May, according to a Reuters poll.