The expansion of the economy's services sector slowed nearly to a standstill in February, as the number of new orders declined sharply from the month earlier, VTB Capital said in a report released Wednesday.

VTB's Purchasing Managers Index fell to 51.0, its lowest level since July, down from 51.9 in January. A value above 50 indicates growth, while a number below 50 indicates contraction.

"The key factor weighing on the service sector’s overall performance in February was a second consecutive monthly fall in incoming new business, with the pace of decline of new orders sharper than in January," the report said.

"Although growth of business activity was sustained for a seventh successive month — largely as a result of service providers’ work on clearing outstanding business — the pace of growth of activity was the weakest of the current sequence."

Employment in the sector has fallen every month since October 2008 and the latest rate of reduction was the fastest in four months, the report said.

Unemployment climbed to 9.2 percent in January, according to the State Statistics Service, the highest level since March 2009.

While retail sales rose for the first time in a year in January, climbing 0.3 percent following a 3.6 percent drop in December, service providers are having trouble attracting new business.

"With new business falling for a second successive month in February, service providers were less optimistic regarding the 12-month outlook than in January," the report said. "A majority of firms still expect growth of activity over the coming year, but the overall degree of confidence was the weakest since last July."