* Chicago PMI posts biggest monthly drop since October 2008
* July U.S. vehicle sales seen cooling from 8-year high (Adds background on latest data)
July 31 (Reuters) - The pace of business activity in the U.S. Midwest in July sank to its slowest since June 2013, signaling a sharp deceleration in that region's economy, a report showed on Thursday.
The Institute for Supply Management-Chicago business barometer tumbled to 52.6 in July from 62.6 in June. Economists had been looking for a July reading of 63.0.
The index's 10-point decline in July was the largest monthly decrease since a 19-point plunge in October 2008 in the aftermath of the collapse of Lehman Brothers during the global financial crisis.
Two months earlier, the Chicago PMI, which is heavily influenced by the U.S. auto industry, stood at 65.5, a seven-month high.
On Friday, domestic automakers are scheduled to release their July vehicle sales figures. Economists polled by Reuters forecast an annualized sales rate of 16.7 million units in July, slower than the 16.98 million pace in June which was its strongest in nearly eight years. (Reporting by Richard Leong; Editing by Meredith Mazzilli and James Dalgleish)