U.S. manufacturing closed out 2012 on the upswing as increased demand at home and abroad helped the sector grow in December at its fastest rate in seven months.

Financial data firm Markit said on Wednesday its U.S. Manufacturing Purchasing Managers Index rose to 54.0 from 52.8 in November. December's reading was a touch below the "flash," or preliminary estimate of 54.2 but was still the highest since May on a final basis.

A reading above 50 indicates expansion.

Firms tied the faster growth to a rise in new orders, with one in five companies reporting an increase. The index's new orders component rose to 54.7, the fastest increase since April, from 53.6 in November.

The second straight monthly increase in new export orders also boosted the sector and could bode well for the year ahead.

"With recent indications that growth is also picking up in other key economies around the world, notably in emerging markets such as China and Brazil, and that the euro zone's economic crisis is easing, U.S. companies should benefit as stronger demand lifts exports in early 2013," said Markit Chief Economist Chris Williamson.

The pace of hiring hit an eight-month high, "suggesting underlying improvement in demand pushed away worries about the 'fiscal cliff' to the backs of manufacturers' minds," Williamson said.

For months, Americans had been worried about the "fiscal cliff", some $600 billion of automatic tax hikes and spending cuts that had been set to take effect in January, which economists had said could push the economy into recession. On Tuesday, U.S. lawmakers reached a deal to avoid the tax hikes and spending cuts.