The last time the national survey came in above the critical 50 level, which signals expansion in the sector, was August when the influential index came in at 50.5. In November, the index came in at 49.2.

The Insitute's new orders index surged to 63.3 from 49.9 in November -- the largest one-month increase since August 1980. A barometer of future production, the new orders index has recovered close to its peak of 65.3 in March.

Other indexes in the report showed modest gains, with the employment index up slightly to 47.4 from 43.8.