Activity in the services sector slowed more than expected in July.

The Institute of Supply Management's index fell to 55.7 percent, nearly 3 percentage points below an expected decline to 58.6 percent from 59.1 percent in June, according to economists polled by Reuters.

The majority of the 16 service industries which responded to the survey cited escalating trade tensions as a primary concern.The tit-for-tat tariffs between the U.S. and other global economic powers took a bite out of business activity despite positive sentiment on domestic conditions.

"Tariffs and deliveries are an ongoing concern," said Anthony Nieves, chair of the Institute of Supply Management. "The majority of respondents remain positive about business conditions and the economy."

Despite the decline, a report above 50 percent marks the sector's 102nd month of expansion. A reading above 50 percent indicates growth in the service sector while a reading below 50 percent signals contraction.

The measure tracks growth in the service industries, including construction, education, wholesale trade and transportation.