NEW YORK (CNN/Money) - Manufacturing growth slowed in April, an industry group said Monday, coming in a bit below Wall Street forecasts for the sector.
The Institute for Supply Management said its index of manufacturing activity edged down to 62.4 for April from 62.5 in March. Analysts surveyed by Briefing.com forecast the index would rise to 62.7. Any reading above 50 reflects growth in manufacturing.
The ISM index, based on a survey of purchasing and supply executives at more than 400 industrial companies, found manufacturers reporting higher prices for purchases, with the price component of the index rising to 88 from 86 in March. The prices paid rate was the highest since November 1979.
The report came a day before policy-makers at the Federal Reserve are due to meet to discuss the economy and interest rates. While economists don't expect the Fed to raise short-term rates Tuesday, recent reports showing a return of inflationary pressures have raised expectations that the central bank will start raising rates later this year.
ISM reported an improved outlook for production and employment -- the production component rose to 67 from 65.5, while employment increased to 57.8 from 57.0.
That marked the strongest employment reading for that part of the index since December of 1987. It marks the sixth straight month of positive employment outlook, following 37 straight months that saw a contraction of employment.
The improved employment outlook is also a factor that is seen leading the Fed towards a rate hike.
"The second quarter is off to a very strong start," the report read. "Many respondents indicate that order backlogs are growing for the first time in several years."
The group's new orders index edged down to 65.0 from 65.7 in March. But 51 percent of those surveyed expect new orders to strengthen, up from 50 percent in March, while those expecting a drop in new orders fell to 7 percent from 9 percent in March.
The one sector that saw the strongest decline was inventories, which fell to 44.8 from 48.3 in March. But respondents said customers do not have sufficient inventories on hand.
Despite the overall manufacturing strength, the report warned, "There are still a number of companies in various industries that have yet to benefit from the recovery. Persistent themes are concerns for availability of ferrous and non-ferrous metals, and escalating costs in a market that is still resistant to higher consumer prices."
Several other readings of manufacturing, including the Federal Reserve banks of New York and Philadelphia, and the Chicago purchasing managers' index, have all shown improvement in the sector in April.
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