UPDATE 2-N.Y. manufacturing activity slows a tad in August

(Recasts, adds survey details about credit)

NEW YORK, Aug 15 (Reuters) - Manufacturing activity in New York State grew more slowly in August, but still showed signs of expansion despite fears about problems in the subprime mortgage sector, according to a New York Federal Reserve survey released on Wednesday.

The New York Fed's "Empire State" general business conditions index fell modestly to 25.06 in August from 26.46 in July. Economists polled by Reuters had expected an Augustreading of 18.50.

In contrast to the financial market turmoil this summer over losses linked to subprime mortgages that banks and hedge funds are suffering, companies surveyed by the New York Fed in August ranked the cost and availability of credit at the bottom in terms of their own problems.

Rather, these companies cited finding qualified workers and cost of employee benefits as more of a problem for them this year than a year ago, the New York Fed said.

This tight regional labor condition was reflected in August's data. The index on the number of employees stood at 11.62 against 11.39 in July, while the gauge on average workweek jumped to 16.13 from 6.17 in July.

Meanwhile, the survey's inventory reading improved to minus 2.15 from July's minus 19.75, while its new orders index slipped to 22.21 in August from 26.52 in July.

On the price front, the survey's prices paid component was 34.41 versus 34.57 in July, while the prices received gauge fell to 3.23, its lowest level in two years, from 8.64 in July.

The survey's future indexes suggested that business conditions would continue to grow over the next six months, the N.Y. Fed said.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.