WASHINGTON U.S. manufacturing contracted for a 10th straight month in August, but the pace of decline continued to slow, suggesting that the sector could be stabilizing at lower levels.

The Institute for Supply Management (ISM) said on Friday that its manufacturing PMI increased to 47.6 last month from 46.4 in July. The index slumped to 46.0 in June, which was the lowest reading since May 2020.

Since last November, the PMI has been stuck below the 50 threshold, which indicates contraction in manufacturing, the longest such stretch since the 2007-2009 Great Recession.

Economists polled by Reuters had forecast the index rising to 47. Manufacturing, which accounts for 11.1% of the economy, has been hammered by 525 basis points worth of interest rate increases from the Fed since March 2022.

Spending on long-lasting manufactured goods has slowed after booming during the COVID-19 pandemic, with services like airline travel, visits to amusement parks and concerts now in favor.

The ISM survey's forward-looking new orders sub-index slipped to 46.8 last month from 47.3 in July. Order books improved slightly, though they remained depressed. Inventories at factories and their customers remained very low in August, a hopeful sign for future production.

Though prices for factory inputs remained subdued, they showed signs of reversing. The survey's measure of prices paid by manufacturers rose to 48.4 last month from 42.6 in July.

Factory employment pulled off three-year lows, but remained weak. The survey's gauge of factory employment rose to 48.5 from 44.4 in July, the lowest reading since July 2020.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)