The Institute for Supply Management-Chicago Inc. said today its business barometer climbed to a 10-month high of 64 from 60.2 in January. Readings above 50 signal growth. Economists forecast the gauge would rise to 61, according to the median of 59 estimates in a Bloomberg News survey.

A pickup in auto sales, sustained corporate investment in equipment and continued inventory rebuilding are driving the factory-led expansion. Orders and production accelerated this month, prompting the strongest pace of manufacturing employment growth since May 1984, the report showed.

“The factory sector is operating at a healthy level,” Richard DeKaser, deputy chief economist at Parthenon Group Inc. in Boston, said before the report. “There is still a restocking process going on that is translating into more orders and production. Motor vehicle sales have exceeded expectations. Consumers continue to play a supporting role, not a lead role, in the economy.”

Economists’ projections in the Bloomberg survey ranged from 58.3 to 63.

Stocks added to gains after the figures. The Standard & Poor’s 500 Index climbed 0.3 percent to 1,376.8 at 9:54 a.m. in New York.

Fourth Quarter Growth

Another report today from the Commerce Department showed the economy grew at a 3 percent pace in the fourth quarter, more than in the previous estimate. Consumer spending rose at a 2.1 percent rate.

The Chicago group’s employment measure rose to 64.2 from 54.7 the prior month. The production gauge increased to 67.8, the highest since April, from 63.8, and the index of new orders climbed to 69.2, an 11-month high.

The measure of prices paid rose to 65.6 from 62.4 and a gauge of inventories decreased to 49.6, the lowest since August 2010, from 51.6. The order backlogs index rose to 53.6 from 48.3.

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

National Index

The ISM’s national factory index rose in February to 54.5 from 54.1 the prior month, according to the median projection in a Bloomberg survey ahead of the group’s report tomorrow. Like the Chicago survey, a reading greater than 50 signals expansion.

New York-region factories expanded in February at the fastest rate since June 2010 and manufacturing in the Philadelphia area grew the most in four months, separate figures from the Federal Reserve showed last week.

“For many products demand has been above our ability to produce,” Mike DeWalt, director of investor relations at Caterpillar Inc., said on a Jan. 26 conference call with analysts. “We have invested in Caterpillar factories in the United States and around the world to increase production.”

Even with planned increases in capital expenditures this year, “we’re still very tight on many products and are currently quoting extended delivery times for them,” he said.

Factory Jobs

That may explain the gains in manufacturing employment. Factory payrolls jumped by 50,000 in January, the most in a year, and the industry’s workers put in the longest workweek on average since January 1998, the Labor Department monthly data showed on Feb. 3.

Vehicle demand should also drive production at the nation’s auto plants. Cars and light trucks sold at a 14.1 million annual rate last month, according to industry data. Excluding a surge in August 2009 tied to the government’s “cash-for-clunkers” program, it was the strongest month since May 2008.

While it’s had a limited effect on household sentiment, higher fuel costs still pose a risk to consumer spending, which accounts for about 70 percent of the economy. The price of a gallon of regular unleaded gasoline climbed to $3.72 as of Feb. 27 from a 10-month low of $3.21 on Dec. 20, according to AAA, the nation’s largest automobile association.