Investors worried about inflation were closely watching for a spike in the prices manufacturers paid for raw materials. Federal Reserve officials say the biggest risk to the economy is if inflation fails to recede.

While the moderation in the latest prices paid index was encouraging, analysts say a trend hasn't been established that costs are under control.

The top performing industries in June were petroleum and coal products; chemical products; plastics and rubber products; food, beverage and tobacco products; nonmetallic mineral products; computer and electronic products; paper products; fabricated metal products; primary metals; miscellaneous manufacturing; textile mills; and machinery.

"Following a weak first quarter, the manufacturing sector rebounded in a strong fashion during the second quarter," said Norbert J. Ore, chair of ISM's survey committee.

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