Investing.com -- Morgan Stanley raised its forecast for the July ISM Manufacturing PMI to 53.8, up from 53.3 in June, according to a note released Monday.

The forecast follows stronger Texas manufacturing activity in July, which showed gains in demand and output. Employment in the sector continued to expand during the month.

The Dallas Fed ISM-equivalent index increased to 53.3 from 52.9, driven by stronger production and new orders, Morgan Stanley said.

Both input and output price measures slowed in July. The prices paid index may not have fully captured the recent increase in energy prices, the bank noted.

Longer delivery times and continued inventory accumulation indicate stronger demand rather than renewed supply chain constraints, according to Morgan Stanley.