Markit's purchasing managers' index for manufacturing, which accounts for about 10 percent of Greece's economy, rose to 49.6 in December from 49.2 a month earlier, hitting its highest level in more than four years.

But the index remained below the 50-point mark dividing growth from contraction.

December's reading offered signs that the country's economy may be bottoming out after six years of austerity-fuelled recession, which has shrunk gross domestic product (GDP) by about a quarter and driven unemployment to record levels.

The PMI index has held below the 50 mark since September 2009, just before Greece's fiscal problems came to light, plunging its economy deep into recession and leading Athens to seek an international bailout.

Athens expects the economy to recover in 2014, projecting GDP will expand by 0.6 percent.

December's output rise was mainly centred on consumer goods as capital goods production shrank further. Expanding output was the result of stronger domestic demand as new export orders fell, the survey showed.

"The PMI fell agonisingly short of the all-important 50.0 threshold in December, remaining in contraction territory due to further declines in two of its sub-components, namely employment and pre-production stocks," said Markit economist Phil Smith.

The latest data suggest that a business cycle upturn may have already started as output and new orders rose simultaneously for the first time since April 2009, Smith said.

But there was no encouraging news on the employment front as firms continued to shed staff. Greece is suffering from record unemployment, more than twice the average in the euro zone. Its jobless rate registered 27.4 percent in September.

"Growth in new orders will need to be sustained before an outright recovery can be declared," Smith said.

(Reporting by George Georgiopoulos; Editing by Toby Chopra)