German manufacturing activity continued to contract in December although expectations for future business turned positive for the first time since April, according to a survey released on Tuesday.

The HCOB final Purchasing Managers' Index (PMI) for manufacturing rose to an eight-month high in December of 43.3, up from 42.6 in November.

However, even after the fifth consecutive monthly increase, the indicator remained below the 50 mark that separates growth from contraction.

Cyrus de la Rubia, Hamburg Commercial Bank (HCOB) chief economist, likened the situation of Germany's manufacturing sector to that of a hiker trying to climb back out of a valley.

"Progress is evident in the search for an exit, yet uncertainty lingers about the proximity of finding the right path," de la Rubia said.

Output and employment fell at a faster rate in December, as job shedding gathered pace in response to lower capacity utilisation.

The survey's more forward-looking indicators remained on an upward trajectory, with new orders dropping at their slowest rate in eight months and expectations for the business outlook turning positive for the first time since last April.

( Editing by Susan Fenton)