The Institute for Supply Management reported that the ISM manufacturing index came in well below expectations last month, falling from 54.1 in January to 52.4 in February, as prices paid was one of only a few categories to post an increase.

The important new orders index fell from 57.6 in January to 54.9 last month, still indicating solid growth as readings above and below 50 indicate expansion and contraction, respectively. Production fell from 55.7 to 55.3, employment fell from 54.3 to 53.2, and prices paid rose a full six points, from 55.5 to 61.5.

The Commerce Department reported that higher levels of spending by consumers and businesses resulted in an upward revision to U.S. economic growth during the fourth quarter of 2011, the annualized rate of 2.8 percent that was reported a month ago revised up to 3.0 percent in the second of three estimates for the period.

Rising business inventories continued to be the most important factor in producing the best performance by the U.S. economy in a year-and-a-half as this volatile component accounted for a full 1.9 percentage points of the overall 3.0 percent growth rate. Personal spending accounted for 1.5 percentage points, due primarily to rising auto sales, while government spending subtracted 0.9 percentage points from the total.

If the nation is about to enter a recession, then somebody better tell the Institute for Supply Management’s manufacturing index that rose to a seven month high last month, the important new orders component continuing to indicate a healthy expansion.

The overall index, where readings above and below 50 indicate expansion and contraction, respectively, rose from 53.1 in December to 54.1 in January and, while this was slightly below consensus estimates, a jump in the new orders component from 54.8 to 57.6 compensated for that disappointment.

Not surprisingly (given the rise in new orders) backlog orders rose from 48.0 to 52.5, however, there were a few negatives as production fell from 58.9 to 55.7 and the employment index dipped from 54.8 to 54.3.

The Commerce Department reported that the U.S. economy grew at an annual rate of 2.8 percent in the fourth quarter, a slightly slower pace than expected.

This is the first of three estimates for the period and marks the best growth rate in a year-and-a-half following a reading of 1.8 percent in the third quarter. But, don’t be surprised if the most recent data is revised lower since downward revisions have been the norm in recent quarters, the third quarter data starting out at a similar level – a 2.5 percent rate – when it was initially reported.

The bulk of the overall gain (more than 1.9 percentage points of the 2.8 percent figure) came from rising inventories and, since this category is subject to heavy revisions in the second estimate, there is more reason to think that GDP could be revised lower next month.

Personal consumption made a positive contribution of 1.5 percentage points, primarily the purchase of durable goods, and government spending subtracted 0.9 percentage points while net exports were a small negative.

Faster growth to close out 2011 ended a sluggish year as the economy grew by just 1.7 percent, down from 3.0 percent in 2010 after contraction in both 2008 and 2009.