U.S. manufacturing expanded in July for a 14th straight month and employment in the factory sector was still on the increase, a report released by the Institute for Supply Management (search) Monday showed.

The ISM said its index of national factory activity rose to 62.0 in July from 61.1 in June, right in line with Wall Street forecasts. Any reading above 50 indicates growth.

In January the index stood at a two-decade high of 63.6, and it has now been above 60 for nine straight months.

"Apart from the slight hiccup in June, everything is consistently positive for the manufacturing sector," said William Cheney, chief economist at John Hancock Financial Services (search) in Boston.

The ISM's employment component slipped to 57.3 in July from 59.7. Some analysts had feared a bigger drop in the jobs index after the Chicago purchasing managers' survey on Friday, which showed net job losses in the Midwest region.

"The employment index, while it declined, remains incredibly strong," said Mark Vitner, senior economist at Wachovia Securities (search) in Charlotte, N.C.

ISM's prices paid index eased to 77.0 from 81.0 as commodity prices fell back from recent highs. New orders, the engine behind potential hiring, rose to 64.7 from 60.0 in June. Inventories fell to 49.9 from 51.1.

The ISM index is compiled from monthly responses by purchasing executives at more than 400 industrial companies, ranging from textiles and chemicals to paper and computers.