Manufacturing expanded slightly in December, bouncing back from an unexpected contraction the prior month, according to an industry report released on Wednesday.

The Institute for Supply Management (ISM) said its index of national factory activity rose to 50.7 from 49.5 in November. The reading narrowly beat 50.3, the median expectation of 55 economists polled by Reuters.

A reading above 50 indicates expansion in the sector.

While the index recovered from the 40-month low hit in November, it was well off the 54.1 reading seen in January 2012, suggesting manufacturing was still struggling to regain the momentum it had at the start of last year.

The employment index rose to 52.7 in December from 48.4, while the forward-looking new orders component was steady at 50.3. Prices paid jumped to 55.5 from 52.5, beating expectations of 51.5.

(Reporting By Steven C. Johnson; Editing by Chizu Nomiyama)