ISM: Manufacturing Growth Strong in Feb.

The pace of growth in the U.S. manufacturing sector in February ran at its strongest since November as new orders rebounded to the highest in over a year and inflation subsided, a survey showed on Wednesday.

The Institute for Supply Management said its index of national factory activity rose to 56.7 in February from 54.8 in January, beating economists' forecasts for a rise to 55.6.

A reading above 50 indicates growth in the factory sector, and the ISM index has held above this level for about three years in a row. February's number was the highest for the index since November 2005.

"The (February) manufacturing report was a little better than expected, showing continued growth in manufacturing," said Gary Thayer, chief economist for AG Edwards & Sons.

"It's encouraging that the employment component went up nicely, as well as orders, and this supports the view that first-quarter economic activity is much better than what we saw in the fourth quarter of last year," he said.

The new orders component, a gauge of future growth, rose to 61.9 from 58.0 in January, the highest for this component since December 2004, when it was at 66.3.

Other key subcomponents also painted an optimistic picture of the manufacturing sector, as the employment index rose to 55.0 from 51.3.

The prices paid component, an indicator of inflation, fell to 62.5 from 65.0 in January, thanks to declining energy prices.

This was the lowest prices-paid reading since August 2005, just before Hurricane Katrina hit the U.S. Gulf Coast and temporarily shuttered regional oil refining capacity.