Factory activity in the U.S. Mid-Atlantic region turned positive in August and an index gauging the U.S. economy's prospects rose for a fourth straight month in July, indicating the recession was leveling out, according to two separate reports Thursday.

The Philadelphia Federal Reserve Bank said its business activity index was at 4.2 in August versus minus 7.5 in July, exceeding even the most optimistic forecasts. This data broke a 10-month run of contraction, helped by a jump in new orders.

Economists polled by Reuters had forecast a median reading of minus 2.0, in a range of minus 8 to plus 3.

Any reading above zero indicates expansion in the region's manufacturing sector.

The survey covers factories in a region encompassing eastern Pennsylvania, southern New Jersey and Delaware and is looked at closely as one of the first indicators of the health of the U.S. manufacturing sector.

Also Thursday, the index of leading economic indicators, which is supposed to forecast economic trends six to nine months ahead, rose 0.6 percent to 101.6 after a revised 0.8 percent gain in June, a private research firm said.

Wall Street economists had forecast a rise of 0.7 percent after an initially reported 0.7 percent increase in June.

"The indicators suggest that the recession is bottoming out and that the economic activity will likely begin recovering soon," said the Conference Board's economist Ken Goldstein.