A report from the Institute for Supply Management (ISM) showed on Thursday the U.S. manufacturing sector expanded in July at a slower pace than in June.

The ISM's index of manufacturing activity came in at 51.2 percent last month, down 0.5 percentage point from the June reading of 51.7 percent, and beat economists' forecast for a 52.0 percent reading. That was the lowest reading since August 2016.

A reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.

According to the report, the New Orders Index stood at 50.8 percent, a gain of 0.8 percentage point from the June reading, while the Inventories Index recorded 49.5 percent, an increase of 0.4 percentage point, and the Supplier Deliveries Index registered 53.3 percent, an advance of 2.6 percentage points. At the same time, the Production Index came in at 50.8 percent in June, a 3.3-percentage point drop compared to the June reading, and the Employment Index was at 51.7 percent, a decline of 2.8 percentage point.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee said, “The past relationship between the PMI and the overall economy indicates that the PMI for July (51.2 percent) corresponds to a 2.5-percent increase in real gross domestic product (GDP) on an annualized basis."