NEW YORK (Reuters) - The pace of growth in manufacturing slowed modestly in May but a gauge of new orders rose to its highest in over a year, according to an industry report released on Friday.
The Institute for Supply Management said its index of national factory activity slipped to 53.5 from 54.8 in April, just missing expectations for 53.9.
Despite the softer pace, the sector still grew for the 34th month in a row, suggesting manufacturing is holding up better than its counterparts overseas. The new orders index rose to their highest since April 2011 at 60.1 from 58.2
"We have to look hard to find something positive, but the manufacturing side of the economy is still moving ahead," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
"The bottom line is we're not contracting, but (we're) not moving ahead very fast."
Data earlier in the day showed manufacturing in the euro zone contracted at its steepest pace in nearly three years, while China's sector also slowed.
Still, fears that the economy is losing traction were predominant after earlier data showed job growth braked sharply last month and stocks held losses immediately after the ISM report. The dollar extended losses against the euro, while Treasuries prices were steady at higher levels.
ISM's gauge of manufacturing employment also eased to 56.9 from 57.3.
A separate industry survey from Markit showed manufacturing grew at its slowest pace in three months as economic trouble overseas dented demand for exports.
(Reporting by Leah Schnurr, additional reporting by Caroline Valetkevitch; Editing by Chizu Nomiyama)