NEW YORK (CNNMoney.com) -- Manufacturing executives on Monday reported slower-than-expected growth in June.

The Institute of Supply Management said its manufacturing index for last month fell to 53.8 from May's 54.4 reading.

Economists surveyed by Briefing.com had forecast growth would pick up to 55.0.

Any reading above 50 in the overall ISM manufacturing index indicates growth in the sector.

"Manufacturing growth continued in June, and although the rate of growth slowed slightly, renewed strength in June's New Orders Index provides encouragement for the third quarter," said Norbert Ore, chair of the ISM's survey committee.

"The sector is benefiting from the weaker dollar and business investment. While energy and raw material prices are still a concern, our members indicate that they are coping with the challenges, and generally see their businesses in a continuing growth mode."

June was the 37th consecutive month that the index showed growth in the sector.

The ISM report shows the economy's growth slowing somewhat, and investors are watching closely to read the pace of the slowdown.

Last week the Federal Reserve raised the overnight borrowing rate for the 17th straight time, to 5.25 percent. This puts the overnight bank lending rate at its highest since January 2001. (Full story)

Another rate increase is widely expected in August, but the Fed has recently eased its language on inflation, raising investors' hopes that the hikes may end soon.

U.S. construction spending unexpectedly staged its biggest drop since September 2004 in May, a government report showed Monday, adding to signs the long-hot housing market is cooling. (Full story)

Construction spending fell 0.4 percent to a seasonally adjusted annual rate of $1.206 trillion in May from April's $1.211 trillion, which was a decline from a record level in March. The two straight monthly falls were the first back-to-back drops since February and March 2003.

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