WASHINGTON — A measure of the U.S. services sector improved slightly in December, beating analysts' estimates, but pending home sales and factory orders both fell more than expected and the overall economic outlook remains grim.

In a reading bolstered by improvements in new orders and employment, the Institute for Supply Management said Tuesday its services sector index rose to 40.6 in December from 37.3 in November. Wall Street economists surveyed by Thomson Reuters expected the index to slip slightly to 37.

But the index from a trade group of purchasing executives continues to signal the sector is shrinking as any reading below 50 signals contraction. Prices continued to fall, with that component of the index hitting its lowest level since it was first reported in 1997. The report is based on a survey of the institute's members in industries including hotels, retail, health care and mining.

Elsewhere, the government said orders to U.S. factories fell for a record fourth straight month in November, and analysts believe manufacturing will continue to suffer in coming months.