New York state's manufacturing sector rebounded slightly in December from its weakest level in six months while the region's business outlook stayed relatively upbeat, a report from the New York Federal Reserve released on Monday showed.

The New York Fed's "Empire State" general business conditions index edged back into positive territory at 0.98 from minus 2.21 in November. It fell short of the 4.75 reading forecast among economists polled by Reuters.

A reading above zero indicates expansion.

The regional Fed's indicator signaled some improvement in current business activity but labor conditions remained weak.

On the other hand, the New York Fed said its forward gauges stayed "fairly optimistic."

The new orders index was less negative at minus 3.54 compared with minus 5.53 in November, while the shipment component turned positive at 7.66 from minus 0.53 last month.

Labor market conditions remained tepid, with the index for the number of employees stuck at zero for a second straight month. The average employee workweek index dropped to minus 10.84 from minus 5.26 in November.

The report's outlook indicators pulled back from November's levels but held near their recent peaks. The index of six-month business conditions retreated to 35.72 from 37.51.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.