The index showed broad-based strength with gains in the production, new orders and employment components of the report.
Government bonds trimmed gains, while stocks pared losses on the data, which analysts said helped to soothe concerns of a possible recession in the world's largest economy.
"Overall, today's data are not telling us that we are going to have a recession -- the word that has been coming up for the last couple of days," said Manfred Wolf, director of foreign
exchange at HVB Bank in New York.
"Everything will be in check and I believe U.S. interest rates will not change for some time, even though we have a slowdown in the housing market," he said.
U.S. short-term interest rate futures at one point on Thursday completely priced in quarter-percentage-point interest rate cuts by the Federal Reserve in both August and December.
The prices paid index, which measures inflationary pressures within the factory sector, jumped to 59.0, the highest since September last year, from 53.0 in January.
Wachovia Chief Economist John Silvia said the prices paid index suggests sustained inflation pressures.
"No Fed ease for now," Silvia said.
New orders, a gauge of future growth, rose to 54.9 from 50.3, while the employment index climbed to 51.1 from 49.5. Production was up at 54.1 in February from 49.6 in January,
while inventories climbed to 44.6 from 39.9.
Construction Spending Falls 0.8%
Separately, the Commerce Department reported that U.S. construction spending fell a deeper-than-expected 0.8% in January, driven by a 10th straight month of falling residential building, a government report said on Thursday.
Construction spending fell more than the anticipated 0.5% drop based on the median forecast of analysts. But construction spending in December rose an upwardly revised 0.6% from a previously reported decline of 0.4%, the Commerce Department reported.
Private residential building fell 1.8% in January, the 10th drop in a row, after a 1.0% drop in December.
The overall decline in construction in January would have been larger if not for federal spending, which jumped 9.7% in January to an all-time high level of $22.4 billion.
Private nonresidential construction spending was unchanged in January after a 2.3% rise in December.
Total U.S. construction spending of $1.18 trillion was down 1.2% in January compared to a year ago. And compared to a year ago, private residential construction spending was down 13% in January.