Hopes of an end to the US manufacturing slump have risen with an unexpectedly large rise in an influential sector index.

Factory activity as measured by the Institute for Supply Management, formerly the National Association of Purchasing Management, rose to an index level of 48.2 in December.

While the figure was below the 50 'breakeven' level, and meant that US manufacturing had suffered its 17th successive month of contraction, it was higher than Wall Street had expected.

Analysts had been expecting the index to hit only 46.

"While the manufacturing sector continues to decline, the rate of decline has slowed very quickly, giving some hope that recovery may come faster than is generally found in a major downturn," said Norbert Ore, chair of the ISM's Manufacturing Business Survey Committee.

"What this is saying is that the sector is contracting at a slower pace than what it was before," said Scott Anderson, senior economist at Wells Fargo.

"We really do think this is a real bottom for the manufacturing sector."

Tech revival

Recovery was also seen in demand for factory products, with the ISM's new orders index rising last month to 54.9, its highest level since April 2000.

"In December, both new orders and production returned to a growth scenario and the trend for most of the indexes is definitely in the right direction," Mr Ore said.

Particular recovery was seen in the "electronic components and equipment" and "instruments and photographic equipment" sectors.

Both sectors recorded growth in new orders, the ISM said.

"When combined with electronic components surfacing on the short supply list we may be seeing the first indications that the tech sector recovery may have begun," said Mr Ore.