WASHINGTON (MarketWatch) -- Activity among the nation's manufacturing firms slowed for the third month in a row in July, consistent with an outlook for a slower pace of factory activity in the second half of the year, according to a closely followed survey of top executives released Monday.
The Institute for Supply Management index fell to 55.5% in July from 56.2% in June.
This was above the 55.0% expected by economists surveyed by MarketWatch. See calendar and forecasts of all major U.S. indicators.
The index is at its lowest level since last December.
Readings over 50% in the ISM diffusion index indicate that more firms are growing than contracting.
The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better this month than last.
At the current level, the ISM's consistent with growth of about 5% at an annualized clip. Manufacturing has been much stronger than the rest of the economy.
The nation's economy, as measured by gross domestic product, grew at a 2.4% pace in the second quarter.
Norbert Ore, head of the ISM's survey committee, said he thought the factory sector would slow but stay above 50 for the remainder of the year.
After a steep decline during the recession, the factory sector rebounded sharply, helping to jump start the recovery. Ore said manufacturing couldn't be expected to continue to pull the economy on its own.
"I would expect manufacturing would need some help going forward," Ore said.
Ten of 18 industries as tracked by Tempe, Ariz.-based ISM were growing in July, led by plastics, paper and electrical equipment.
Details of ISM manufacturing report
July's new-orders index fell to 53.5% from 58.5% in June, the ISM's data showed.
The production dropped in July to 57.0% from 61.4%.
The employment index increased to 58.6% from 57.8% in the prior month.
The prices-paid index rebounded a bit to 57.5% from 57.0%. The index had collapsed by 20.5 percentage points in June.
The inventories index rose to 50.2% for July. June's reading was 45.8%.
New export orders rose to 56.5% from 56.0% in June.
The U.S. data caps a mixed day of factory reports from around the globe.
