FOR RELEASE: July 1, 2004

Contact:	Kristen Kioa
	ISM, Media Relations
	Tempe, Arizona
	(800) 888-6276, Ext. 3015

PMI at 61.1%

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire United States, while the regional reports cover only their local vicinity. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of June 2004.

New Orders, Production, Employment, Inventories Grow
Supplier Deliveries Slower

(Tempe, Arizona) — Economic activity in the manufacturing sector grew in June for the 13th consecutive month, while the overall economy grew for the 32nd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Norbert J. Ore, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee and group director, strategic sourcing and procurement, Georgia-Pacific Corporation. "The manufacturing sector grew at a slightly slower, but still aggressive, rate in June. The rate of growth in New Orders and Production remained encouraging as we head into the third quarter. Additionally, the Inventories Index rose above 50 percent, a somewhat rare occurrence, but not unexpected at this stage of a recovery."

ISM's Customer Inventories Index indicates that customer inventories are low, while the ISM Prices Index indicates that manufacturers once again experienced higher prices in their purchases. The Backlog of Orders Index indicates that order backlogs increased in June. The New Export Orders and Import Indexes continued to grow in June.

Comments from respondents continue to indicate demand is still strong in most industries, but concerns about the cost of energy are repeated numerous times. There are mentions of lengthening leadtimes, but it appears that members are able to work through these issues at this time.

ISM's PMI registered 61.1 percent in June, a decrease of 1.7 percentage points when compared to 62.8 percent in May. ISM's New Orders Index declined 2.8 percentage points from 62.8 percent in May to 60 percent in June. ISM's Production Index decreased 1.6 percentage points from 64.8 percent in May to 63.2 percent in June. The ISM Employment Index is at 59.7 percent for June, a decrease of 2.2 percentage points when compared to the 61.9 percent reported in May.

ISM's Supplier Deliveries Index registered 68.1 percent, 1.3 percentage points lower than May's 69.4 percent. ISM's Inventories Index registered 51.1 percent in June, up from the 49.3 percent reported in May. ISM's Customers' Inventories Index for June is at 39 percent, an increase of 2 percentage points compared to the May reading of 37 percent. ISM's Prices Index in June is 81 percent, 5 percentage points lower than the 86 percent reported in May.

ISM's Backlog of Orders Index decreased 4.5 percentage points, registering 58.5 percent in June compared to 63 percent in May. ISM's New Export Orders Index registered 56.7 percent, a decrease of 3.9 percentage points from May's 60.6 percent. ISM's Imports Index decreased 2.2 percentage points to 57.6 percent in June, down from 59.8 percent in May.

"June represents a strong finish to the first half of the year, and the current picture is very encouraging for the third quarter as New Orders and Production are still growing significantly," said Ore.

In June, 17 industries reported growth: Instruments & Photographic Equipment; Rubber & Plastic Products; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Petroleum; Fabricated Metals; Miscellaneous*; Chemicals; Paper; Textiles; Apparel; Primary Metals; Leather; Transportation & Equipment; Printing & Publishing; and Furniture.

"ABS Plastic; Adhesives; Aluminum; Brass/Brass Products; Butadiene; Caustic Soda; Chemicals; Coal; Copper; Corrugated Containers; Crude Oil; Diesel Fuel; Electronic Components; Energy; Freight; Fuel Oil; Gasoline; Hardwood Lumber; HDPE; LDPE; Linerboard; Memory; Natural Gas; Packaging; Paper; Particle Board; Plastic — Molded; Plastic Resin; Plastics; Plywood; Polyethylene Resin; Pulp; PVC; Resins; Rubber Products; Stainless Steel; Steel; and Steel Products (various forms) are the commodities listed as up in price. The commodities listed in short supply include Caustic Soda; Cement; Coal; Electronic Components; Stainless Steel; and Steel. The only commodity reported down in price is Soybean Oil," Ore stated.

JUNE 2004 ISM BUSINESS SURVEY AT A GLANCE

	Series Index	Direction June vs May	Rate of Change June vs May
PMI	61.1	Growing	Slower
New Orders	60.0	Growing	Slower
Production	63.2	Growing	Slower
Employment	59.7	Growing	Slower
Supplier Deliveries	68.1	Slowing	Slower
Inventories	51.1	Growing	From Contracting
Customers' Inventories	39.0	Too Low	Slower
Prices	81.0	Increasing	Slower
Backlog of Orders	58.5	Growing	Slower
New Export Orders	56.7	Growing	Slower
Imports	57.6	Growing	Slower

THE ECONOMY AT A GLANCE

Overall Economy	Growing	Slower
Manufacturing	Growing	Slower

PMI

The PMI indicates that the manufacturing economy grew in June for the 13th consecutive month. The PMI for June registered 61.1 percent, a decrease of 1.7 percentage points compared to the May reading of 62.8 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI in excess of 42.8 percent, over a period of time, generally indicates an expansion of the overall economy. The June PMI indicates that both the overall economy and the manufacturing sector are growing. The past relationship between the PMI and the overall economy indicates that the average PMI for January through June (62.3 percent) corresponds to a 7.1 percent increase in real gross domestic product (GDP). In addition, if the PMI for June (61.1 percent) is annualized, this corresponds to a 6.7 percent increase in GDP.

Month	Jun'04	May'04	Apr'04	Mar'04	Feb'04
PMI%	61.1	62.8	62.4	62.5	61.4
Month	Jan'04	Dec'03	Nov'03	Oct'03	Sep'03
PMI%	63.6	63.4	61.3	57.1	54.7
Month	Aug'03	Jul'03	Jun'03	May'03	Apr'03
PMI%	55.0	52.6	50.4	50.0	46.2

New Orders

ISM's New Orders Index grew in June with a reading of 60 percent. The index is 2.8 percentage points lower than the 62.8 percent registered in May, and it is the 14th consecutive month the index has exceeded 50 percent. A New Orders Index above 51 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 1987 dollars). Twelve industries report increases for the month of June: Instruments & Photographic Equipment; Rubber & Plastic Products; Wood & Wood Products; Electronic Components & Equipment; Chemicals; Industrial & Commercial Equipment & Computers; Paper; Glass, Stone & Aggregate; Fabricated Metals; Primary Metals; Transportation & Equipment; and Miscellaneous*.

New Orders	%Better	%Same	%Worse	Net	Index
June 2004	38	49	13	+25	60.0
May 2004	48	38	14	+34	62.8
April 2004	51	42	7	+44	65.0
March 2004	50	41	9	+41	65.7

Production

ISM's Production Index is 63.2 percent in June, 1.6 percentage points lower than the 64.8 percent reported in May, reflecting the 14th consecutive month of growth. An index above 49.9 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. Of the industries reporting in June, 14 registered growth: Rubber & Plastic Products; Industrial & Commercial Equipment & Computers; Wood & Wood Products; Instruments & Photographic Equipment; Fabricated Metals; Electronic Components & Equipment; Miscellaneous*; Apparel; Chemicals; Paper; Textiles; Primary Metals; Furniture; and Transportation & Equipment.

Production	%Better	%Same	%Worse	Net	Index
June 2004	40	49	11	+29	63.2
May 2004	46	43	11	+35	64.8
April 2004	48	45	7	+41	67.0
March 2004	46	47	7	+39	65.5

Employment

ISM's Employment Index grew for the eighth consecutive month, following a 37-month trend of contraction. The index registered 59.7 percent in June compared to 61.9 percent in May, a decrease of 2.2 percentage points. An Employment Index above 48 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The 17 industries reporting growth in employment during June are: Petroleum; Leather; Textiles; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Miscellaneous*; Apparel; Wood & Wood Products; Rubber & Plastic Products; Fabricated Metals; Printing & Publishing; Transportation & Equipment; Primary Metals; Chemicals; Food; and Furniture.

Employment	%Higher	%Same	%Lower	Net	Index
June 2004	35	56	9	+26	59.7
May 2004	36	57	7	+29	61.9
April 2004	30	58	12	+18	57.8
March 2004	26	65	9	+17	57.0

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower for the 30th consecutive month in June. ISM's Supplier Deliveries Index for June registered 68.1 percent, a decrease of 1.3 percentage points compared to May's reading of 69.4 percent. A reading above 50 percent indicates slower deliveries. The 16 industries reporting slower supplier deliveries in June are: Petroleum; Apparel; Instruments & Photographic Equipment; Electronic Components & Equipment; Paper; Fabricated Metals; Industrial & Commercial Equipment & Computers; Wood & Wood Products; Miscellaneous*; Chemicals; Printing & Publishing; Transportation & Equipment; Food; Rubber & Plastic Products; Furniture; and Primary Metals.

Supplier Deliveries	%Slower	%Same	%Faster	Net	Index
June 2004	39	58	3	+36	68.1
May 2004	41	57	2	+39	69.4
April 2004	38	58	4	+34	67.1
March 2004	38	59	3	+35	67.9

NOTE: A list of commodities in short supply is available at the end of this report.

Inventories

Manufacturers' inventories grew slightly in June for the first time in more than four years, ending a trend of inventory reduction as the Inventories Index has registered under 50 percent for 52 consecutive months. ISM's Inventories Index registered 51.1 percent, an increase of 1.8 percentage points when compared to May's 49.3 percent. An Inventories Index greater than 42.3 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in constant 1987 dollars). The 10 industries reporting higher inventories in June are: Leather; Instruments & Photographic Equipment; Primary Metals; Rubber & Plastic Products; Paper; Miscellaneous*; Printing & Publishing; Industrial & Commercial Equipment & Computers; Fabricated Metals; and Furniture.

Inventories	%Higher	%Same	%Lower	Net	Index
June 2004	20	62	18	+2	51.1
May 2004	19	61	20	-1	49.3
April 2004	15	61	24	-9	44.8
March 2004	18	63	19	-1	48.3

Customers' Inventories**

The June Customers' Inventories Index is at 39 percent, an increase of 2 percentage points compared to the May reading of 37 percent. Respondents indicate that their customers do not have sufficient inventories on hand at this time. This is the 37th consecutive month that the index has registered below 50 percent. Furniture; Miscellaneous*; and Primary Metals are the industries reporting higher customer inventories during June.

Customers' Inventories	%Reporting	% Too High	% About Right	% Too Low	Net	Index
June 2004	72	8	62	30	-22	39.0
May 2004	70	6	62	32	-26	37.0
April 2004	73	11	59	30	-19	40.5
March 2004	78	8	63	29	-21	39.5

Prices**

ISM's Prices Index indicates manufacturers continued to pay higher prices, but at a slower rate than in June. This is the 28th consecutive month the index has registered higher prices. June's index is at 81 percent, 5 percentage points lower than May's reading of 86 percent. During June, 66 percent of supply executives reported paying higher prices and 4 percent reported paying lower prices, while 30 percent reported that prices were unchanged from the preceding month.

A Prices Index below 46.9 percent, over time, is generally consistent with a decrease in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. All 20 industries reported paying higher prices in June: Tobacco; Petroleum; Leather; Printing & Publishing; Primary Metals; Chemicals; Paper; Instruments & Photographic Equipment; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Wood & Wood Products; Miscellaneous*; Transportation & Equipment; Furniture; Glass, Stone & Aggregate; Fabricated Metals; Rubber & Plastic Products; Textiles; Apparel; and Food.

Prices	%Higher	%Same	%Lower	Net	Index
June 2004	66	30	4	+62	81.0
May 2004	74	24	2	+72	86.0
April 2004	77	22	1	+76	88.0
March 2004	73	26	1	+72	86.0

NOTE: A list of commodities up in price and down in price is available at the end of this report.

Backlog of Orders**

ISM's Backlog of Orders Index registered 58.5 percent, indicating manufacturers' backlogs in June grew at a slower rate when compared to May. Of the 88 percent of respondents who report their backlog of orders, 31 percent reported greater backlogs, 14 percent reported smaller backlogs, and 55 percent reported no change from May. The 11 industries reporting an increase in order backlogs during the month are: Electronic Components & Equipment; Instruments & Photographic Equipment; Wood & Wood Products; Industrial & Commercial Equipment & Computers; Paper; Furniture; Rubber & Plastic Products; Chemicals; Primary Metals; Transportation & Equipment; and Miscellaneous*.

Backlog of Orders	%Reporting	%Greater	%Same	%Less	Net	Index
June 2004	88	31	55	14	+17	58.5
May 2004	87	42	42	16	+26	63.0
April 2004	88	43	47	10	+33	66.5
March 2004	87	38	51	11	+27	63.5

New Export Orders

ISM's New Export Orders Index for June registered 56.7 percent, a decrease of 3.9 percentage points when compared to May's index of 60.6 percent. This is the 19th consecutive month of growth in export orders. The 11 industries reporting growth in new export orders in June are: Electronic Components & Equipment; Paper; Miscellaneous*; Furniture; Fabricated Metals; Chemicals; Instruments & Photographic Equipment; Primary Metals; Industrial & Commercial Equipment & Computers; Rubber & Plastic Products; and Transportation & Equipment.

New Export Orders	%Reporting	%Better	%Same	%Worse	Net	Index
June 2004	77	24	70	6	+18	56.7
May 2004	77	25	71	4	+21	60.6
April 2004	78	27	69	4	+23	61.0
March 2004	77	27	70	3	+24	62.0

Imports

Imports of materials by manufacturers grew during June as the Imports Index registered 57.6 percent. The index declined 2.2 percentage points when compared to May's index of 59.8 percent, indicating a slower rate of growth. The 10 industries reporting growth in import activity for June are: Instruments & Photographic Equipment; Fabricated Metals; Industrial & Commercial Equipment & Computers; Furniture; Transportation & Equipment; Miscellaneous*; Printing & Publishing; Electronic Components & Equipment; Wood & Wood Products; and Chemicals.

Imports	%Reporting	%Higher	%Same	%Lower	Net	Index
June 2004	78	22	74	4	+18	57.6
May 2004	77	24	72	4	+20	59.8
April 2004	78	24	72	4	+20	58.5
March 2004	79	23	69	8	+15	56.8

*Miscellaneous is a preponderance of jewelry, toys, sporting goods, and musical instruments.

**The Backlog of Orders, Prices, and Customers' Inventories Indexes do not meet the accepted criteria for seasonal adjustments.

Buying Policy

Average commitment leadtime for Capital Expenditures decreased 1 day to 105 days. Average leadtime for Production Materials is unchanged at 44 days. Average leadtime for Maintenance, Repair, and Operating (MRO) supplies increased 1 day to 22 days.

Percent Reporting
	Hand to Mouth	30 Days	60 Days	90 Days	6 Mos.	1 Year+	Avg. Days
Capital Expenditures
June 2004	23	9	16	20	23	9	105
May 2004	25	9	15	19	22	10	106
April 2004	27	9	11	21	24	8	102
March 2004	26	8	13	22	23	8	102
Production Materials
June 2004	25	40	20	11	3	1	44
May 2004	21	44	21	11	2	1	44
April 2004	22	39	21	13	3	2	50
March 2004	24	41	19	12	3	1	45
MRO Supplies
June 2004	51	38	9	1	1	0	22
May 2004	55	35	7	2	1	0	21
April 2004	54	35	8	2	1	0	22
March 2004	50	39	8	3	0	0	22

In Short Supply

Caustic Soda; Cement; Coal — 2nd month; Electronic Components — 6th month; Stainless Steel — 6th month; and Steel — 6th month.

Up in Price

ABS Plastic; Adhesives; Aluminum — 8th month; Brass/Brass Products; Butadiene — 2nd month; Caustic Soda — 2nd month; Chemicals — 5th month; Coal — 2nd month; Copper — 6th month; Corrugated Containers — 5th month; Crude Oil — 2nd month; Diesel Fuel — 4th month; Electronic Components — 2nd month; Energy — 6th month; Freight — 4th month; Fuel Oil — 6th month; Gasoline — 6th month; Hardwood Lumber — 2nd month; HDPE — 4th month; LDPE; Linerboard; Memory; Natural Gas — 23rd month; Packaging; Paper — 4th month; Particle Board — 5th month; Plastic – Molded; Plastic Resin — 3rd month; Plastics — 5th month; Plywood — 2nd month; Polyethylene Resin; Pulp; PVC; Resins; Rubber Products; Stainless Steel — 9th month; Steel — 9th month; and Steel Products (various forms) — 3rd month.

Down in Price

Soybean Oil.

The data presented herein is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations. ISM makes no representation, other than that stated within this release, regarding the individual company data collection procedures. Use of the data is in the public domain and should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation

The Manufacturing ISM Report On Business® is based on data compiled from monthly replies to questions asked of purchasing and supply executives in over 400 industrial companies. Membership of the Business Survey Committee is diversified by Standard Industrial Classification (SIC) category, based on each industry's contribution to Gross Domestic Product (GDP). Twenty industries from various U.S. geographical areas are represented on the committee. The 20 manufacturing Standard Industry Classification codes are: Food; Tobacco; Textiles; Apparel; Wood & Wood Products; Furniture; Paper; Printing & Publishing; Chemicals; Petroleum; Rubber & Plastic Products; Leather; Glass, Stone, & Aggregate; Primary Metals; Fabricated Metals; Industrial & Commercial Equipment & Computers; Electronic Components & Equipment; Transportation & Equipment; Instruments & Photographic Equipment; and Miscellaneous (a preponderance of jewelry, toys, sporting goods, musical instruments).

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers' Inventories, Employment, and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher, better, and slower for Supplier Deliveries) and the negative economic direction (lower, worse, and faster for Supplier Deliveries), and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive).

The resulting single index number is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-moveable holidays. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The PMI is a composite index based on the seasonally adjusted diffusion indices for five of the indicators with varying weights: New Orders – 30%; Production – 25%; Employment – 20%; Supplier Deliveries – 15%; and Inventories – 10%.

Diffusion indices have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent that it is generally declining. A PMI over 42.8 percent, over a period of time, indicates that the overall economy, or Gross Domestic Product (GDP), is generally expanding; below 42.8 percent, it is generally declining. The distance from 50 percent or 42.8 percent is indicative of the strength of the expansion or decline. With some of the indicators within this report, ISM has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis.

Responses to Buying Policy reflect the percent reporting the current month's leadtime, the approximate weighted number of days ahead for which commitments are made for Production Materials, Capital Expenditures, and Maintenance, Repair, and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days. These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern.

The data presented herein is obtained from a survey of manufacturing supply managers based on information they have collected within their respective organizations. ISM makes no representation, other than that stated within this release, regarding the individual company data collection procedures. Use of the data is in the public domain and should be compared to all other economic data sources when used in decision-making.

The Manufacturing ISM Report On Business® is published monthly by the Institute for Supply Management™. The Institute for Supply Management™, established in 1915, is the world's leading educator of supply management professionals and is a valuable resource for decision makers in major markets, companies, and government. The report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Manufacturing ISM Report On Business® is posted on ISM's Web site at www.ism.ws on the first business day of every month after 10:10 a.m. (ET).

The next Manufacturing ISM Report On Business® featuring the July 2004 data will be released at 10:00 a.m. (ET) on August 2, 2004.

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