NEW YORK (CNN/Money) - Growth in the U.S. services sector slowed dramatically in June, the nation's purchasing managers reported Tuesday, coming in below the previous month's reading and well shy of economists' forecasts.

The Institute for Supply Management said its services index fell to 59.9 in June, down from May's reading of 65.2, and below Wall Street's expectations for a reading of 63.0, according to Briefing.com.

A reading above 50 indicates expansion in the sector, while a reading below signals contraction.

The ISM report is the latest indicator to point to a cooling U.S. economy.

Recent disappointing reports from the retail and job sectors have led to the increased belief that the Federal Reserve will continue to move gradually as it raises interest rates in the coming months to ward off inflation.

However, the prices paid segment of the services report showed accelerating growth of 74.6 in June from 74.4 in May. Employment in the services sector also showed expansion with a reading of 57.4, up from the previous reading of 56.3.

Industries reporting the highest growth rates in June were transportation, agriculture, real estate and business services. The only industry reporting contraction was wholesale trade, according to the report.