NEW YORK -- The pace of decline in U.S. manufacturing activity waned for a third straight month in January, raising hopes that a recovery from the recession was imminent, a Feb. 1 report showed.

The Institute for Supply Management's monthly Purchasing Managers' Index rose to 49.9 in January, just shy of the key 50 level mark, which would indicate the sector, about one-sixth of U.S. economic activity, was expanding.

January's reading, the highest since August 2000, was above market expectations for 49.4 and up from December's revised reading of 48.1. ISM revised its 2001 December survey to reflect its annual updating of seasonal adjustment factors.

The ISM's New Orders Index, a gauge of demand for factory goods in the pipeline, was little changed at 55.3 in January, after December's massive surge to a revised 55.5, the report showed. New Export Orders rose to 50.8 percent in January, up from December's revised 47.6 percent reading.