(Adds details from report, market reaction)
NEW YORK, March 1 (Reuters) - The pace of growth in the U.S. manufacturing sector unexpectedly slowed in February after three consecutive months of gains in a reminder of the bumpy nature of the economic recovery.
The Institute for Supply Management said its index of national factory activity fell to 52.4 from 54.1 the month before. The reading was shy of expectations of 54.5, according to a Reuters poll of economists.
The pace of growth was the slowest in three months.
U.S. stocks cut their gains after the release, while U.S. Treasury bonds cut losses. The dollar initially gained against the euro after the data but fell back.
The ISM reading came as a surprise to investors a day after the Chicago PMI index, a barometer of activity in manufacturing in the U.S. Midwest, rose its highest in 10 months in February as new orders and employment gained.
“This was certainly softer than expected. Prices paid were up sharply, a reflection of higher energy and commodities,” said Omer Esiner, chief market analyst at commonwealth foreign exchange in Washington D.C.
“I suspect risk appetite will moderate a little bit from here and we are already seeing the dollar perk up a bit as a result.”
The index’s new order component, seen as one of the most forward looking elements of the survey fell to 54.9 from 57.6. Prices paid, watched at an indication of inflationary pressure in the economy, rose to 61.5 from 55.5.
The survey, one of the earliest indications of how the economy is fairing nationally, comes little more than a week ahead of closely watched non-farm payrolls data that is expected to show the economy added in the region of 200,000 jobs in February.
The indexes employment component fell to 53.2 versus 54.3 in January.
New U.S. claims for unemployment benefits edged down last week, holding near four-year lows, according to a government report on Thursday that suggested the labor market was gaining momentum. (Reporting by Edward Krudy; Editing by James Dalgleish)