NEW YORK (CNN/Money) - U.S. manufacturing activity in the Midwest expanded for the sixth straight month in July but at a slower pace than in June, according to data released Wednesday, and analysts said it suggests the Federal Reserve may keep rates steady for longer than earlier anticipated.

The National Association of Purchasing Management-Chicago index fell to 51.5 in July from 58.2 in June. It was the sixth straight reading above 50, pointing to an expanding regional manufacturing economy. A reading below 50 signals contraction.

Economists polled by Reuters had forecast the July index at 56.7. The index began to show signs of improvement early this year, with February marking the first time in 18 months the index was above 50.

"We tend to look at this and the Philadelphia index as an indication of what is going on in the overall economy," said Robert Brusca, chief economist at Echobest Consulting. "Most disturbing is that order backlogs are running over 50 percent, which is the glorified neutral. It's at 6 percentage points below, that's bad -- it shows companies are cannibalizing orders to move ahead."

The employment component of the index fell to 48.1 after reaching 48.9 in June. Prices paid rose to 64.5 from 58.2.

Recent data on the U.S. economy have been weak. An advance reading of second-quarter gross domestic product showed the economy grew at an annual rate of 1.1 percent, compared with downwardly revised growth of 5.0 percent in the first quarter. July consumer confidence data released Tuesday came in at 97.1, down from 106.3 in June, and last week's survey from the University of Michigan came in at 88.1 for July, its lowest level since November 2001.  

--from staff and wire reports