The US Institute for Supply Management's manufacturing index - a key sign of industrial activity - rose to 49.9 in January from a revised 48.1 in December.
The report by the ISM, formerly the National Association of Purchasing Management, was roughly in line with expectations and suggests a recovery in the hard-hit manufacturing sector. Any figure below 50 suggests declining activity while a higher figure suggests expansion.
But ISM chair Norbert Ore said the report showed improvement in manufacturing and an overall economy that is probably growing. 'While the manufacturing decline is now in its 18th month, some industries are starting to show significant signs of recovery as both new orders and new export orders are improving.'
Figures released earlier showed that the US unemployment rate dropped to 5.6% in January from 5.8% in December, as 89,000 jobs were lost.
In separate figures, the University of Michigan consumer sentiment index rose to 93 in January from 88.8 a month earlier, lower than initial estimates of 94.2 and Wall Street forecasts of 93.5.
Analysts had forecast a 0.1% rise in unemployment, with 26,000 jobs lost. Hourly earnings were unchanged from December, but up 4% year-on-year.
Manufacturing jobs fell 89,000 in January, the slowest pace since September. The drop was led by temporary shutdowns in car plants and continued job loss at aircraft factories.
Unemployment rose 0.2% in December - reaching its highest level since April 1995.
