In June, the Composite Index of activity in the manufacturing sector compiled by the Institute of Supply Management rose 2.4 points to 53.8 and recovered all of the prior month's decline. Consensus expectations had been for stability at 51.5.

During the last twenty years there has been a 64% correlation between the level of the Composite Index and the three month growth in factory sector industrial production.

New orders recovered all of the decline during the prior two months with a 5.5 point rise to 57.2. The index of export orders, however, fell to the lowest since December 2001.

The employment index improved modestly to 49.9 but remained below the break even level of 50 for a second month. During the last twenty years there has been a 67% correlation between the level of the ISM Employment Index and the three month growth in factory sector employment.

The production index (55.6) rose moderately while the inventories index was unchanged and below 50 for the third consecutive month.

The prices paid index again fell sharply to the lowest since early 2002. During the last twenty years there has been an 81% correlation between vendor delivery speed and prices.