FOR RELEASE: August 1, 2006

Contact:	Rose Marie Goupil
	ISM, Media Relations
	Tempe, Arizona
	800/888-6276, Ext. 3015
	E-mail: rgoupil@ism.ws

PMI at 54.7%

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 contain primarily regional data from their local vicinities. 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 July 2006.

New Orders, Production Growing
Employment, Inventories Growing
Deliveries Slowing

(Tempe, Arizona) — Economic activity in the manufacturing sector grew in July for the 38th consecutive month, while the overall economy grew for the 57th 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. "Manufacturing growth accelerated in July driven by an upswing in production following June's increase in new orders. Employment expanded after a one-month decline, while inventories grew after two months of contraction. The overall message is that manufacturing is proving to be quite resilient in the face of higher interest rates and weakening consumer spending. Strong demand continues to put upward price pressure on primary metals including copper and nickel."

TOP PERFORMING INDUSTRIES

The 12 industries reporting growth in July — listed in order — are: Primary Metals; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Furniture & Related Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Computer & Electronic Products; Paper Products; Plastics & Rubber Products; Nonmetallic Mineral Products; and Machinery.

WHAT RESPONDENTS ARE SAYING ...

• "Having problems with supply on various raw materials ... into our busy season, but having to cut back product due to supply problems." (Chemical Products)
• "Nickel hit an all-time high ... on the LME. Copper, zinc and other non-precious metals are running at or near record highs." (Chemical Products)
• "Customers are delaying purchases previously planned for. Result is flat levels from prior months ... well below budgeted expectations." (Machinery)
• "Business remains strong, but higher raw material prices result in reduced margins." (Primary Metals)
• "Higher fuel charges on in-bound and out-bound freight." (Miscellaneous Manufacturing)

MANUFACTURING AT A GLANCE JULY 2006
Index	Series Index July	Series Index June	Percentage Point Change	Direction	Rate of Change	Trend* (Months)
PMI	54.7	53.8	+0.9	Growing	Faster	38
New Orders	56.1	57.9	-1.8	Growing	Slower	39
Production	57.6	55.1	+2.5	Growing	Faster	39
Employment	50.7	48.7	+2.0	Growing	From Contracting	1
Supplier Deliveries	55.4	55.0	+0.4	Slowing	Faster	37
Inventories	50.5	46.9	+3.6	Growing	From Contracting	1
Customers' Inventories	44.5	45.5	-1.0	Too Low	Slower	62
Prices	78.5	76.5	+2.0	Increasing	Faster	12
Backlog of Orders	50.5	54.0	-3.5	Growing	Slower	7
Exports	51.9	55.4	-3.5	Growing	Slower	44
Imports	57.5	56.5	+1.0	Growing	Faster	55
OVERALL ECONOMY				Growing	Faster	57
Manufacturing Sector				Growing	Faster	38

*Number of months moving in current direction

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price

Aluminum* (12); Carbon Black; Chemicals (4); Copper (14); Copper Products (8); Corrugated Containers (9); Electronic Components; Energy; Freight (5); Fuel Oil; Nickel; Oil (2); Paper (7); Particle Board (5); Plastic Resins; Plastics (4); Resins; Solvents; Stainless Steel (3); Steel (5); Steel Scrap; and Zinc.

Commodities Down in Price

Aluminum* and Natural Gas (7).

Commodities in Short Supply

Nickel; Particle Board (3); and Steel (4).

Note: The number of consecutive months the commodity is listed is indicated after each item.
* Reported as both up and down in price.

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JULY 2006 MANUFACTURING INDEX SUMMARIES

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PMI

The PMI indicates that the manufacturing economy grew in July for the 38th consecutive month as it registered 54.7 percent, an increase of 0.9 percentage point when compared to June's reading of 53.8 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 percent, over a period of time, generally indicates an expansion of the overall economy. The July 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 July (55.3 percent) corresponds to a 4.6 percent increase in real gross domestic product (GDP). In addition, if the PMI for July (54.7 percent) is annualized, it corresponds to a 4.4 percent increase in real GDP annually."

THE LAST 12 MONTHS

Month	PMI		Month	PMI
Jul 2006	54.7		Jan 2006	54.8
Jun 2006	53.8		Dec 2005	55.6
May 2006	54.4		Nov 2005	57.3
Apr 2006	57.3		Oct 2005	58.1
Mar 2006	55.2		Sep 2005	58.0
Feb 2006	56.7		Aug 2005	53.5
Average for 12 months – 55.8 High – 58.1 Low – 53.5

New Orders

ISM's New Orders Index registered 56.1 percent in July. The index is 1.8 percentage points lower than the 57.9 percent registered in June. July is the 39th consecutive month the index has exceeded 50 percent. A New Orders Index above 51.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars). Nine industries reported increases during July: Primary Metals; Food, Beverage & Tobacco Products; Chemical Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Paper Products; and Furniture & Related Products.

New Orders	% Better	% Same	% Worse	Net	Index
Jul 2006	29	52	19	+10	56.1
Jun 2006	34	48	18	+16	57.9
May 2006	31	49	20	+11	53.7
Apr 2006	35	53	12	+23	57.6

Production

ISM's Production Index registered 57.6 percent in July, 2.5 percentage points higher than the 55.1 percent reported in June. July is the 39th consecutive month of growth in the index. An index above 50 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures. Of the industries reporting in July, nine registered growth: Primary Metals; Chemical Products; Food, Beverage & Tobacco Products; Paper Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Textile Mills; Miscellaneous Manufacturing; and Computer & Electronic Products.

Production	% Better	% Same	% Worse	Net	Index
Jul 2006	27	56	17	+10	57.6
Jun 2006	27	56	17	+10	55.1
May 2006	32	53	15	+17	57.2
Apr 2006	35	57	8	+27	60.4

Employment

ISM's Employment Index registered 50.7 in July, an increase of 2 percentage points when compared to June's reading of 48.7 percent. June ended 12 consecutive months of growth in manufacturing employment, and July now represents a return to employment growth in the sector. An Employment Index above 48.9 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. The seven industries reporting growth in employment during July are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Primary Metals; Food, Beverage & Tobacco Products; Chemical Products; and Machinery.

Employment	% Higher	% Same	% Lower	Net	Index
Jul 2006	16	70	14	+2	50.7
Jun 2006	17	69	14	+3	48.7
May 2006	20	72	8	+12	52.9
Apr 2006	24	66	10	+14	55.8

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower for the 37th consecutive month in July. ISM's Supplier Deliveries Index for July registered 55.4 percent, an increase of 0.4 percentage point when compared to June's reading of 55 percent. A reading above 50 percent indicates slower deliveries. The 12 industries reporting slower supplier deliveries in July are: Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Primary Metals; Textile Mills; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Computer & Electronic Products; Fabricated Metal Products; Transportation Equipment; Chemical Products; and Machinery.

Supplier Deliveries	% Slower	% Same	% Faster	Net	Index
Jul 2006	16	80	4	+12	55.4
Jun 2006	15	82	3	+12	55.0
May 2006	20	77	3	+17	57.6
Apr 2006	19	77	4	+15	57.7

Inventories

Manufacturers' inventories expanded in July as ISM's Inventories Index registered 50.5 percent, a 3.6 percentage point increase when compared to June's reading of 46.9 percent. An Inventories Index greater than 42.2 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars). The four industries reporting higher inventories in July are: Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Machinery; and Computer & Electronic Products.

Inventories	% Higher	% Same	% Lower	Net	Index
Jul 2006	13	70	17	-4	50.5
Jun 2006	15	65	20	-5	46.9
May 2006	13	71	16	-3	48.0
Apr 2006	19	65	16	+3	51.3

Customers' Inventories*

The ISM Customers' Inventories Index is at 44.5 percent in July, 1 percentage point lower than the 45.5 percent reported in June. The index indicates that respondents believe their customers do not have sufficient inventories on hand (inventories are too low) at this time. This is the 62nd consecutive month that the index has registered below 50 percent. Three industries reported higher customers' inventories during July: Textile Mills; Plastics & Rubber Products; and Food, Beverage & Tobacco Products.

Customers' Inventories	% Reporting	%Too High	%About Right	%Too Low	Net	Index
Jul 2006	73	12	65	23	-11	44.5
Jun 2006	75	12	67	21	-9	45.5
May 2006	74	11	66	23	-12	44.0
Apr 2006	72	13	67	20	-7	46.5

Prices*

In July, the ISM Prices Index was 78.5 percent, indicating manufacturers are paying higher prices on average when compared to June. While 39 percent of supply executives reported paying the same prices and 2 percent reported paying lower prices, the majority of respondents (59 percent) reported that prices were higher than the preceding month.

A Prices Index above 47.1 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices. In July, 17 industries reported paying higher prices: Petroleum & Coal Products; Paper Products; Plastics & Rubber Products; Primary Metals; Miscellaneous Manufacturing; Chemical Products; Machinery; Fabricated Metal Products; Textile Mills; Wood Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Transportation Equipment; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Computer & Electronic Products; and Printing & Related Support Activities.

Prices	% Higher	% Same	% Lower	Net	Index
Jul 2006	59	39	2	+57	78.5
Jun 2006	57	39	4	+53	76.5
May 2006	56	42	2	+54	77.0
Apr 2006	53	37	10	+43	71.5

Backlog of Orders*

ISM's Backlog of Orders Index registered 50.5 percent, indicating manufacturers' backlogs in July are expanding at a slower rate when compared to June. The index is 3.5 percentage points lower than the 54 percent reported in June. Of the 88 percent of respondents who report their backlog of orders, 19 percent reported greater backlogs, 18 percent reported smaller backlogs, and 63 percent reported no change from June. The six industries reporting an increase in order backlogs in July are: Primary Metals; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Machinery; and Computer & Electronic Products.

Backlog of Orders	% Reporting	% Greater	% Same	% Less	Net	Index
Jul 2006	88	19	63	18	+1	50.5
Jun 2006	84	28	52	20	+8	54.0
May 2006	84	23	60	17	+6	53.0
Apr 2006	86	28	58	14	+14	57.0

New Export Orders

ISM's New Export Orders Index registered 51.9 percent in July, a decrease of 3.5 percentage points when compared to June's index of 55.4 percent. This is the 44th consecutive month of growth in export orders. The five industries reporting growth in new export orders in July are: Food, Beverage & Tobacco Products; Furniture & Related Products; Paper Products; Fabricated Metal Products; and Chemical Products.

New Export Orders	% Reporting	% Higher	% Same	% Lower	Net	Index
Jul 2006	79	10	83	7	+3	51.9
Jun 2006	75	17	79	4	+13	55.4
May 2006	79	18	77	5	+13	55.7
Apr 2006	79	16	78	6	+10	53.4

Imports*

Imports of materials by manufacturers grew during July as the Imports Index registered 57.5 percent. The index is 1 percentage point higher when compared to June. The 13 industries reporting growth in import activity for July are: Nonmetallic Mineral Products; Furniture & Related Products; Plastics & Rubber Products; Paper Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; Transportation Equipment; Food, Beverage & Tobacco Products; Primary Metals; Machinery; Miscellaneous Manufacturing; and Fabricated Metal Products.

Imports	% Reporting	% Higher	% Same	% Lower	Net	Index
Jul 2006	83	22	71	7	+15	57.5
Jun 2006	81	19	75	6	+13	56.5
May 2006	82	17	79	4	+13	56.5
Apr 2006	82	21	76	3	+18	59.0

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

Buying Policy

Average commitment leadtime for Capital Expenditures decreased 1 day to 116 days. Average leadtime for Production Materials increased 4 days to 54 days. Average leadtime for Maintenance, Repair and Operating (MRO) supplies increased 4 days to 27 days.

Percent Reporting
Capital Expenditures	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Jul 2006	19	12	13	21	23	12	116
Jun 2006	22	11	11	20	23	13	117
May 2006	23	8	12	21	22	14	120
Apr 2006	23	9	16	14	27	11	114
Production Materials	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Jul 2006	18	38	28	8	6	2	54
Jun 2006	21	33	29	12	4	1	50
May 2006	23	35	27	10	3	2	49
Apr 2006	18	39	27	10	4	2	52
MRO Supplies	Hand- to- Mouth	30 Days	60 Days	90 Days	6 Months	1 Year+	Average Days
Jul 2006	48	36	12	3	0	1	27
Jun 2006	55	26	14	5	0	0	23
May 2006	50	33	12	4	1	0	25
Apr 2006	50	35	11	4	0	0	23

About this Report

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 purchasing and supply executives nationwide. Membership of the Manufacturing Business Survey Committees is diversified by NAICS, based on each industry's contribution to gross domestic product (GDP). Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

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 for those meeting the criteria for seasonal adjustments (PMI, New Orders, Production, Employment, Supplier Deliveries, Inventories and New Export Orders) 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 indexes for five of the indicators with varying weights: New Orders – 30%; Production – 25%; Employment – 20%; Supplier Deliveries – 15%; and Inventories – 10%.

Diffusion indexes 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 indicates that it is generally declining. A PMI in excess of 42.0 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.0 percent, it is generally declining. The distance from 50 percent or 42.0 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 Manufacturing ISM Report On Business® is published monthly by the Institute for Supply Management™. The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM's mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education. This 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 August 2006 data will be released at 10:00 a.m. (ET) on Friday, September 1, 2006.