The US Institute for Supply Management's index of business activity rose to 54.7 in December from 49.2 in November, taking the index above 50 for the first time since August.
A reading above 50 indicates that the manufacturing sector is expanding. The rise in the index was stronger than expected, after Wall Street economists forecast that the index would rise to 50.2.
'The manufacturing sector rebounded in December,' said Norbert Ore, chair of the ISM manufacturing business survey committee.
'A strong showing in new orders drove the PMI upward, while the production index strengthened and help pushed the PMI up by 5.5 percentage points,' Ore added.
The new orders index rose to 63.3 from 49.9 in November, while the production index rose to 55.6 percent from 54.6 and the employment index rose to 47.4 in December from 43.8. The employment index remains below 50 for the 27th consecutive month.
