Economic activity in the U.S. manufacturing sector witnessed slower expansion growth in July, an industry survey showed on Monday.

The manufacturing index, also known as the purchasing managers index (PMI), registered 52.7 in July, down from June's reading of 53.5, the Institute for Supply Management (ISM) said in a report on Monday.

A reading above 50 percent indicates the sector is generally expanding, while a reading below the ratio indicates contraction.

The ISM's new-orders index rose to 56.5 in July, compared to June's reading of 56; and the production index increased 2 points from June to 56 in July. The employment index fell 2.8 points from June's reading of 55.5 to 52.7 in July.

Businesses surveyed were optimistic about their outlook, but noted the uncertainties about international markets and the impacts of the continuing decline in oil prices, said the survey.

Eleven of the 18 manufacturing industries tracked by the ISM reported growth in July, while five industries reported contraction in the month, including wood products, primary metals, plastics and rubber products, chemical products and machinery industries.