purchasing managers' index (PMI) rose 5.2 points to 49.3 points in January, just below the 50-point level that separates manufacturing expansion from contraction.
The PMI has been below 50 for eight months.
"Most of the components of the index rose last month and crossed above the 50-point mark," the report said, citing significant improvement in employment and export orders.
The PMI had jumped to 53.2 points in April, crossing the 50-point threshold for the first time since last October, but the index then fell for four straight months to a three-year low in August.
The PMI index, compiled by Bank Hapoalim and the Israeli Purchasing Managers' Association, had reached a high of 59.1 in December 2010.
The PMI hit a low of 28.5 in January 2009.
Israel's economy grew 3.2% in 2012 and is expected to grow 2.8% in 2013, excluding natural gas production.
The Bank of Israel has cited the low level of the PMI as one reason for lowering short-term interest rates
in recent months.