The U.S. services sector expanded in July for the second consecutive month amid a resurgence in COVID-19 cases, the Institute for Supply Management (ISM) reported Wednesday.

The Services Purchasing Manager's Index, formerly known as the non-manufacturing index, registered 58.1 percent, 1 percentage point higher than the June reading, according to the latest Services ISM Report on Business.

"This reading represents growth in the services sector for the second straight month after contraction in April and May," said Anthony Nieves, chair of the ISM's Services Business Survey Committee.

"Respondents remain concerned about the pandemic; however, they are mostly optimistic about business conditions and the economy as businesses continue to reopen," said Nieves, adding that "sentiment varies across industries."

A business executive from the health care and social assistance industry said surgical services are still only scheduling at 50 percent capacity, and raw material shortages worldwide are affecting the ability to get finished Personal Protective Equipment, according to the report.

"Some business picking up, but mostly virtual meetings, training and consulting. Time will tell if it's profitable," said a respondent from the professional, scientific and technical services industry. "The economic situation is quite dire regionally, so there is no telling if this is a trend or just a short respite."

A representative from the public administration industry highlighted the employment situation, noting that unemployment is up this year, though down compared to last month. "Unemployment last year was 2.9 percent. Last month, it was 19.2 percent. This month, it is 16.2 percent."

In their analysis released on Wednesday, Tim Quinlan and Sarah House, senior economists at Wells Fargo Securities, wrote that the employment component slipped further into contraction territory in July, coming in at 42.1.

"Service providers are not yet ready to call people back to work in large numbers," the economists said.