U.S. manufacturing expansion slowed in July from the previous month as a decline in new orders made factory managers more cautious, according to the Institute for Supply Management Wednesday.

The industry group said its index of national factory activity fell to 53.8 last month, its lowest since March and down from 56.0 in June.

Analysts had been looking for a more modest dip to 55.5, although any reading above 50 still points to expansion.

Consumer spending eased in the second quarter under the weight of a housing sector slump and rising gasoline costs. Analysts said factories could be responding to what might be perceived as a lack of demand.

The ISM's new orders index fell to 57.5 from 60.3, while the employment measure edged down to 50.2 from 51.1 in June, pointing to anemic hiring in the sector. Prices paid declined to 65.0 from 68.0, further evidence that softer growth is damping inflation.