Feb. 28 (Bloomberg) -- Chicago-area business unexpectedly grew at an accelerated pace in February, as orders and employment picked up, a survey of executives in the manufacturing region found. A related measure of prices fell.

The National Association of Purchasing Management-Chicago said its Business Barometer rose to 62.7 this month, the second straight increase, from 62.4 in January. The median forecast from a Bloomberg News survey of 47 economists called for the index to fall to 60.5.

Numbers higher than 50 mean growth, and February is the 22nd consecutive month of expansion. This month's reading also remains close to the 16-year high of 67.7 in October. Business investment in new equipment, along with military spending, is fueling demand for manufactured goods such as aircraft instruments from Rockwell Collins Inc.

``We saw good consumer spending in the second half of last year, and business spending on equipment is very strong,'' said Robert Mellman, an economist at J.P. Morgan Securities in New York, who forecast a 62. `Business spending is definitely accelerating.''

Orders increased at a faster pace, and Chicago-area employment grew at the fastest pace since November. A measure of prices paid by manufacturers fell for the third consecutive month, with fewer reporting price increases and a growing share reporting that prices for materials fell.

Orders, Employment, Prices

The new orders gauge rose to 68.5 in February from 65.8 in January. The employment index rose to 57.7 in February from 52.8 in January. A reading higher than 50 means more companies said they are adding than cutting workers.

The Chicago index of prices paid fell to 70.1, the lowest since February 2004, from 76.5. The price index reached a 16-year high of 88.9 in November. The Chicago inventories index held at 53.2.

Investors and economists watch the Chicago report for clues about the direction of U.S. manufacturing. The Chicago metropolitan area has the second-highest number of factory workers in the U.S. after Los Angeles. The Federal Reserve Bank of Chicago's region, which includes Indiana and Michigan as well, produces 40 percent of U.S. motor vehicles, 35 percent of its steel and almost half of its farm equipment.

Previous indicators suggest that manufacturing was on solid footing this month.

The inventory-sales ratio, a measure of how long supplies may last at the current level of demand, returned at the end of 2004 to a record low of 1.3 months set in March and repeated during the year, the Commerce Department said Feb. 15.

Orders for non-defense capital goods excluding aircraft, an indication of future business investment, rose 2.9 percent in January after rising 3.3 percent in December, the Commerce Department said last week.

Orders `Continuously Up'

A report on U.S. manufacturing is due tomorrow. Economists expect the Institute for Supply Management's national index to rise to 56.9 this month from 56.4 in January, according to the median of 56 estimates. The report will be released tomorrow at 10 a.m. Washington time.

Orders ``have been continuously up for about the last year,'' Clayton Jones, chairman and chief executive of Rockwell Collins Inc., said Feb. 24 in an interview. ``The economy is in good shape.''

Rockwell makes cockpit instruments for Boeing Co. 737 jetliners and F-15 fighters. The Cedar Rapids, Iowa, company expects 2005 profit to rise more than 20 percent and sales 12 percent with increased demand for business jets and cargo planes.

To contact the reporters on this story: Joe Richter in Washington at Jrichter1@bloomberg.net