By Vicki Needham - 03/01/13 03:44 PM EST
Any reading above 50 indicates expansion.
Hiring continued to grow but at a slightly slower pace, dropping to 52.6 from 54.0.
Moutray noted rising prices, with the index for the prices paid for raw materials jumping to 61.5 from 56.5, its fastest pace since this time last year.
The sector, which had led the economic recovery, flagged last summer amid uncertainty about fiscal cliff negotiations and a drop in foreign demand, especially in cash-strapped Europe.
The sector contracted in November but has improved since then.
One survey respondent noted the slowdown in defense spending, which contributed to anemic growth of 0.1 percent in the final quarter of last year, the slowest growth in two years.
The concern could be further exacerbated by $85 billion in spending cuts that went into effect on Friday and could, eventually, lead to furloughs and a drop in spending at the Defense Department.
A transportation equipment producer said "Europe is still a concern in the auto sector" because of continued economic woes.