Business activity in the U.S. unexpectedly expanded in February at the fastest pace in almost a year, a sign the manufacturing industry is poised for growth.

The MNI Chicago Report business barometer rose to 56.8, the highest level since March, after a reading of 55.6 in January. Numbers greater than 50 signal expansion. The median forecast of 51 economists surveyed by Bloomberg was 54.

Manufacturing, which makes up about 12 percent of the U.S. economy, is regaining its footing after slipping in mid 2012 as overseas markets heal, companies spend more on equipment and automobile sales improve. Strength in the factory sector indicates producers are still seeing demand even amid higher taxes on consumers and signs that lawmakers in Washington won't come to agreement on a budget deal.

"Manufacturing is showing slow and steady improvement, like most of the rest of the economy," strategist Gennadiy Goldberg, with TD Securities Inc. in Manhattan, said before the report. "It's been a bright spot pretty recently."

Estimates in the Bloomberg survey ranged from 52.2 to 58. The index average 54.6 in 2012 and 62.8 in 2011.

The Chicago group's gauge of new orders climbed to 60.2 in February, also the highest in almost a year, from 58.2 in January. A measure of employment decreased to 55.7 from 58, a seven-month high.

The production index was little changed, easing to 60.2 from 60.9 in January, a 10-month high, today's report showed.

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Economists monitor the Chicago index and other regional reports for an early reading on the national manufacturing outlook. The Chicago group includes goods producers and service providers with operations in the U.S. and abroad, making the gauge a measure of overall growth.

The Institute for Supply Management's factory index for February, due tomorrow, will probably show expansion for the third month, according to the median forecast of economists surveyed by Bloomberg.