ISM U.S. manufacturing index falls to 56.3 in July

NEW YORK, Aug 1 (Reuters) - The U.S. economy's manufacturing sector expanded in July but at a slower pace than the previous month, according to an industry report released on Tuesday.

The Institute for Supply Management (ISM) said its index of national factory activity fell to 56.3 from 57.8 the month before. The reading was just below expectations of 56.5 from a Reuters poll of 66 economists.

A reading above 50 indicates expansion in the manufacturing sector and a reading below 50 indicates contraction.

The employment index fell to 55.2 from 57.2 a month earlier. Expectations called for a reading of 55.1.

New orders dropped to 60.4 from 63.5. The prices paid index rose to 62.0 from 55.0, compared to expectations of 55.5. (Reporting by U.S. financial markets team; Editing by Meredith Mazzilli)