The Tempe, Ariz.-based Institute for Supply Management said its manufacturing index rose to a reading of 40.1 in April from 36.3 in March. A reading below 50 indicates manufacturing activity is shrinking.
Economists had forecast a reading of 38.4, according to consensus estimates gathered by Briefing.com.
"The decline in the manufacturing sector continues to moderate," said Norbert Ore, chair of the ISM's survey committee, in a statement. "This is definitely a good start for the second quarter."
The index, which fell to an all-time low in December, has risen every month in 2009 and is gradually approaching 41, which is the level typically associated with a recession. The index has been below 41 since October.
John Silvia, chief economist at Wachovia Economics Group said the index "suggests we have come off the bottom but are still in recession."
The employment index, which rose 6.3 points to 34.4, remained below breakeven 50, which signals further job losses in manufacturing, according to Silvia.
"Manufacturers will continue to cut jobs as a reflection of the current recession and lower growth expectations for future consumer demand," Silvia wrote in a research report.
While most of the components that make up the index remained in recession territory in April, the report contained signs that manufacturing activity is stabilizing.
The index also showed that new orders and production increased in April compared with March.
Manufacturers reported that customer inventories are "too low" for the first time since July 2008, according to the ISM.
