Manufacturing is "benefiting from continued consumer demand, a turnaround in energy production, and an end to the strengthening of the U.S. dollar.”
The gain in the producer price index was the largest in more than four years but the spillover to consumer inflation may be limited.
"The economy is ending the year on a high note with even the manufacturing sector showing signs of faster growth," an economist says.
The Institute for Supply Management's index falls to 50.8% but the rebound in oil prices may help bring the sector some relief.
At least half of the 18 industries tracked by the ISM expanded in February — the first time since August.
A vital chunk of the world economy is beset by weakness.
Surveys of manufacturing and non-manufacturing sectors "suggest the U.S. economy cooled off in the fourth quarter."
A closely-followed factory gauge reaches its lowest level in more than six years as low commodity prices continue to limit orders.
Before November of this year, the last time manufacturing activity contracted was in November 2012.
A non-manufacturing benchmark shows service providers unexpectedly expanded in October at the second-fastest pace in a decade.
Latest data from Markit show a rebound from June's five-month low but positive economic sentiment fell for the second month in a row.
