WASHINGTON (MarketWatch) — The manufacturing sector saw an acceleration in February to the best level in close to two years, according to a survey released Friday that points to a business sector not afraid Washington will step on its toes.

The Institute for Supply Management’s manufacturing index climbed 1.1 points to 54.2%, coming in ahead of the 52.5% forecast in a MarketWatch-compiled economist poll and reaching the best level since June 2011. ISM reported that 15 out of the 18 industries it follows reported growth.

“This appears to be yet another indicator reflecting a pickup in business activity following January’s ‘fiscal cliff’ relief,” said Steven Wieting of Citigroup in a note to clients.

U.S. stocks SPX, -0.46% were trading lower on the session, though the ISM data helped moved markets off their worst levels. See: Stocks moderate drop after manufacturing data

A GM worker assembles a 2012 Cadillac CTS at an assembly plant in Lansing, Mich. Getty Images

A similarly constructed index from another data provider, Markit, was a nearly identical 54.3%.

The ISM gauge saw expansion in all five of the major subcomponents, including a 4.5 point improvement to 57.8% for new orders and a 4 point advancement for production to 57.6%.

However, employment slowed by 1.4 points to 52.6%.

The agreement reached by Congress and the White House to avert most scheduled tax hikes has helped businesses that nonetheless were showing signs of investment anyway.

The hard data seems to confirm that businesses are willing to spend: core capital-goods orders climbed 6.3% in January, the best gain in two years. See charts of core orders and other indicators in The Week in Charts.

“Automotive is still going strong, which allows budgeting for capital equipment,” said one purchasing manager in the machinery industry.

“Starting to pick up after a slower than normal year-end,” added another manager.

Sequester: argue, delay, cut, repeat

The so-called sequester of automatic budget cuts is due to kick in Friday, however, and may impact sectors particularly exposed to government spending. See Simpson and Bowles commentary: Sequester risks U.S. security.

“Continuing slowdown in defense spending,” reported a computer and electronic products manager.

Friday marked a busy day on the economics calendar. Personal income shrank by the most in 20 years in January due to a rise in payroll tax as well as a reversal from December’s rush of special dividend payments. See: Worst income dip in 20 years doesn’t stop spending.

However, consumer sentiment reached a three-month high in February, according to the University of Michigan. See story on sentiment.

Also, the Commerce Department reported a 2.1% drop in construction spending in January.