Data compiler IHS Markit said its Purchasing Managers' Index (PMI) improved to 49.5 in December after slumping to 40.6 in November, when the economy was hit by France's second coronavirus lockdown of 2020.

The increase, marginally below a preliminary reading of 49.6, brought the index just shy of the 50-point mark dividing a contraction from an expansion in activity and was the highest since August.

"Although the coronavirus crisis is not over, firms are optimistic that 2021 will be a stronger year, with new orders expected to rise as vaccines are rolled out to the population," IHS Markit economist Eliot Kerr said.

"With that, we can expect increasing levels of employment and a recovery towards pre-virus levels of activity."

Many retail stores were able to reopen in December after a month of lockdown, although cafes, hotels and cultural venues remained closed.

The PMI for the service sector rose to 49.1 from 38.8 in November, slightly less than the 49.2 originally reported.

(Reporting by Leigh Thomas; Editing by Catherine Evans)