Business at U.S. manufacturers expanded at a slower-than-expected pace in February, according to a closely watched survey of the sector released Thursday.

The Institute of Supply Management's survey of manufacturing purchasing manages declined to 52.4 percent from 54.1 percent. Economists surveyed by Thomson Reuters had called for an increase to 54.5 percent. Any reading above 50 percent indicates improvement in the sector.

Manufacturing accounts for about 12 percent of the U.S. gross domestic product.

As was the case in January, new orders, production and employment all grew in February -- although at somewhat slower rates than in January, said Bradley Holcomb, chair of the Institute for Supply Management's manufacturing business survey committee.

The new orders index registered 54.9 percent in February, a decrease of 2.7 percentage points when compared with the seasonally adjusted January reading of 57.6 percent.

The ISM survey also found production and employment in the sector expanding at a slower pace in February. Plastics and rubber products, electrical equipment and appliances and components industries reported the biggest decrease in employment.

Elsewhere, manufacturing shrank for a seventh month in the euro zone and unemployment in the area rose to the highest in more than 14 years. But data from China, India and the U.K. showed continued growth in the manufacturing sector.

Following the disappointing ISM release, U.S. Treasuries prices reversed early losses, while equities eased off their highs, though still buoyed by a better-than-expected jobless claims report.

In late morning trading, the Dow Jones Industrial Average gained 33.75 points, or 0.26 percent, to 12,985.82. The Standard & Poor's 500 Index added 4.75 points, or 0.35 percent, to 1,370.43. And the tech-heavy Nasdaq Composite Index rose 11.33 points, or 0.38 percent, to 2,978.22.