The nation's manufacturers reported a slowing of growth in July with only modest increases in prices of raw materials, easing Wall Street fears of an overheating economy.

A survey released today by the National Association of Purchasing Management indicated that the U.S. manufacturing sector grew in July for the sixth straight month, but not as strongly as in the previous month and below analysts' predictions. Price increases also were below expectations.

The figures suggest that a second-quarter slowing of economic growth is continuing into the third quarter.

Federal Reserve Chairman Alan Greenspan has indicated he is poised to raise interest rates for the second time this year on signs of a reemergence of inflation.

"The report put a damper on any plan by the Fed to immediately raise interest rates," said economist Sung Won Sohn at Wells Fargo & Co.

Bryan Jordan, an analyst with Banc One Investment Advisors Corp., noted that the figures, which followed last week's report that the nation's economic growth slowed to 2.3 percent in the second quarter, "are part of a pattern indicating the economy is starting to moderate."

The purchasing managers group, which represents executives who buy raw materials and supplies for industry, said its monthly index of manufacturing activity registered 53.4 percent in July, compared with 57 percent in June. Figures above 50 percent indicate growth. Economic analysts had predicted a reading of 56 in July.

Separately, the Commerce Department reported that construction spending rebounded slightly in June, rising 0.5 percent after falling for two straight months.

The report said spending rose to a seasonally adjusted annual rate of $699.4 billion, after drops of 1.4 percent in both May and in April.

Economists said the purchasing managers' report indicated that growth in manufacturing was slowing.

"I think we are seeing some cooling off in the economy," said Gary Thayer, chief economist with A.G. Edwards & Sons Inc. in St. Louis. "Manufacturing certainly isn't overheating."

Thayer said that "keeping the lid" on growth was the strength of the dollar, which makes U.S. exports less competitive, as well as strong import competition.

He noted that production and new orders were up, though the rate of growth slowed. The new-orders index registered 54.4 percent in July, compared with 61.7 percent in June.

The survey's price index, at 54.7 percent in July compared with 53.5 percent in June, marked the third consecutive month with a price reading above 50 percent. Some analysts had expected it to exceed 55.

Half of the 20 industries represented in the survey indicated they were paying higher prices for raw materials during July, the report said.

The employment index, meanwhile, fell to 49.6 percent in July from 51.9 percent in June. Employment in the manufacturing industry has been falling for nearly a year.

CAPTION: SIGNS OF SLOWING

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