Factory activity in the U.S. mid-Atlantic region grew in March after contracting for two months in a row as new orders and employment improved, a survey showed on Thursday.

The Philadelphia Federal Reserve Bank said its business activity index rose to 2 from minus 12.5 in February, topping economists' expectations for minus 2.

Any reading above zero indicates expansion in the region's manufacturing. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware. 

New orders rose to 0.5 from minus 7.8, while the gauge of the number of employees gained to 2.7 from 0.9. 

The is seen as one of the first monthly indicators of the health of U.S. manufacturing leading up to the national report by the Institute for Supply Management.