NEW YORK (CNNMoney.com) - Manufacturing executives Monday reported faster-than expected-growth last month but also said they were paying higher prices -- feeding fears of more rate hikes ahead by the Federal Reserve.

The Institute of Supply Management said its manufacturing index for last month came in at 57.3, up from the 55.2 reading in March. Economists surveyed by Briefing.com had forecast growth would slow slightly to 55. Any reading above 50 in the overall ISM manufacturing index indicates growth in the sector.

But the survey also found that 53 percent of those surveyed paying higher prices to suppliers last month, up from only 42 percent who were reporting higher prices in March.

With only 10 percent reporting paying lower prices last month, the index raised fears about inflationary pressures that could keep the Fed raising rates beyond its May 10 meeting, at which its 16th straight quarter-percentage point hike is widely expect.

Bond prices fell sharply following the report, lifting the yield on the 10-year treasury to 5.11 from 5.06 at the close of trading Friday. Bond prices and yields move in opposite directions. Stocks posted modest gains.

"While many members indicate that business is good, they still have major concerns about the impact of higher prices for energy and industrial commodities," Norbert Ore, chairman of the ISM's manufacturing business survey committee, said in a statement.

The survey is one of the first readings of economic strength in the second quarter.

Gross domestic product, the broadest measure of the nation's economic activity, grew at a 4.8 percent annual rate in the first quarter, the government reported Friday, and many economists are now looking for second quarter growth of about 4.0 percent.

If that happens the Fed could continue to raise rates at its June meeting and beyond in an effort to keep inflationary pressures in check -- although Fed Chairman Ben Bernanke testified last week that the economy should slow in the second half of the year, which could take pressure off the central bank.

The ISM survey of purchasing executives at about 400 industrial companies also showed a pickup in hiring and production by manufacturers, as 24 percent reported they expected to hire more employees and only 10 percent were pulling back. That compares to March when 19 percent were looking for more employees and 11 percent were expecting to trim staffs.

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