WASHINGTON—Manufacturing activity in the U.S. remained robust in July, but slowed somewhat compared with previous months due to supply chain strains, reports the Institute for Supply Management (ISM) in its latest Manufacturing Report on Business Purchasing Manager's Index (PMI).

The PMI fell to 59.5 in July from 60.6 in June. July's data suggest that the country's factory activity expanded at a solid clip, with four of the five subindexes that form the headline PMI above the 50-point threshold that indicates growth.

"As we enter the third quarter, all segments of the manufacturing economy are impacted by near record-long raw-material lead times, continued shortages of critical basic materials, rising commodities prices and difficulties in transporting products," says. Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.

Demand remained strong in July. The new orders index eased somewhat to 64.9 from 66.0 the previous month, the customers' inventories index edged lower to 25.0 and the backlog of orders increased to a very high 64.5.

The production index cooled to 58.4 from 60.8 in June. The employment index swung into expansion territory, to 52.9 from 49.9 the previous month, signaling payroll growth.