ISM's report said last month’s business activity/production index increased to 66.9 percent from 64.6 percent in January, although new orders slowed to 64.4 percent last month from 64.9 percent.
A strong sign of job growth is reflected in the ISM's employment index, which increased to 55.6 percent from 54.5 percent in January, the highest since April 2006.
Price increases on energy drove up the prices index to 73.3 percent in February from 72.1 percent, the report showed.
The ISM services survey covers industries from utilities and retail to healthcare, finance and transportation.
Today’s ISM report follows the group’s March 1 index that showed manufacturing grew in February at the fastest pace since May 2004 as orders, exports and employment all improved.
Consumers are benefiting from tax cuts, including a Social Security payroll tax, which was reduced by 2 percentage points this year for some taxpayers, putting more money in their pockets.
Meanwhile, there is some threat to the recovery's accelerating pace by rising gasoline costs, which increased 8.8 percent last month, with regular fuel averaging $3.17 a gallon in February, according to AAA. Prices at the pump hit $3.43 a gallon on March 2, the highest price since October 2008.
In other positive news, the Commerce Department reported earlier this week that incomes climbed 1 percent in January, the most since May 2009.
The Labor Department's weekly unemployment figures released today showed applications for jobless benefits decreased by 20,000 to 368,000 in the week ended Feb. 26, the lowest level since May 2008.
A Labor Department report Friday might show that payrolls rose by almost 200,000 workers in February, the biggest gain since May, after a 36,000 gain the previous month.
Earlier this week, Federal Reserve Chairman Ben Bernanke reiterated previous statements that the labor market is improving slowly and it may take several years for the jobless rate to drop to the pre-recession levels of between 5 percent and 6 percent.