NEW YORK (CNNMoney.com) -- Manufacturing growth showed surprising strength in July, even as prices paid jumped, according to a closely watched survey of industry executives released Tuesday.

The Institute of Supply Management said its manufacturing index rose to 54.7 from 53.8 in June. Economists surveyed by Briefing.com were expecting the index to slip to 53.5.

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

The report's prices paid index - which measures inflationary pressures within the sector - rose to its highest since October 2005. It jumped to 78.5 from 76.5 in June, largely due to rising metal prices.

"What I'm seeing here is strong forward momentum in the economy as well as evidence we're in a rising inflation environment," Michael Darda, chief economist and director of research for MKM Partners, said.

The ISM report is one of many that could influence whether central bank policy-makers decide to raise rates for the 18th straight time when they meet next week.

It also offers investors one of the first looks at how the economy is doing in the third quarter. "It's another piece of evidence that suggests the economy is not fundamentally weak in any way," Darda said.

Recent signs of slowing growth, such as the slowdown in second-quarter gross domestic product, have raised hopes the Fed will pause with its rate-raising campaign next week.

But traders are now split over what the Fed will do next week, with interest rate futures showing a 44 percent chance of an increase next week, up from 36 percent late Monday.

Earlier Tuesday a report on personal income and spending showed a steady rise in consumer prices. The report's so-called core PCE deflator, a key inflation gauge, rose 0.2 percent, bringing the increase in core prices over the past 12 months above the Federal Reserve's comfort zone.

GDP hits the brakes