The RBC Canadian purchasing managers index slipped to 53.9 last month from 55.3 in November and October.
A reading of 50 or above on the index indicates expansion in the Canadian manufacturing sector.
RBC says the findings indicate business conditions for manufacturers continued to improve in December, but at a slower pace relative to the previous month, when the index matched 12-month highs set in October and November 2013.
The bank said the recent collapse in oil prices poses some risk to spending in the energy sector, but added that lower gasoline prices will help to improve exports to the United States and Canadian consumer spending.
It also says Ontario's manufacturing sector will probably benefit from lower fuel prices more than other regions.
The index, published the Royal Bank in association with the Supply Chain Management Association and financial information services company Markit, is based on a questionnaire sent to purchasing executives at more than 400 industrial companies.
It tracks, new orders, output, employment, suppliers' delivery times and stock of items purchased.