By John S. McClenahen If the U.S. economy is to grow at a 3.5% to 4% annual rate during this second half of 2003, manufacturing will have to do better than it did during the first six months. The manufacturing sector of the economy was still contracting -- albeit narrowly -- during June, indicate data from the Institute for Supply Management (ISM), Tempe, Ariz. Its closely watched manufacturing activity index was at 49.8% in June, nearly a half-point higher than May's 49.4% mark but still below the 50% figure that separates contraction from expansion. "While the overall economy appears to be in a recovery, the manufacturing sector failed to grow in June," relates Norbert J. Ore, the chairperson of ISM's manufacturing business survey committee and group director for strategic sourcing and procurement at Georgia-Pacific Corp. However, improved showings in June by three index elements -- new orders, production, and new export orders -- encourage Ore. "It appears that manufacturing is positioned for a recovery in the second half." He's not the only encouraged executive. "The good news is that orders are beginning to pick up, so we could see manufacturing employment begin to increase modestly in the fourth quarter," says Jerry J. Jasinowski, president of the National Association of Manufacturers, Washington, D.C.