The Federal Reserve Bank of Philadelphia said Thursday that its gauge of regional business activity fell to -3.3 in June from 2.6 in the prior month.
Economists expected a reading of 4.8, according to a Wall Street Journal survey.
Any number below zero indicates a contraction in the manufacturing sector.
Key details: The headline index is based on a single stand-alone question about business conditions, unlike the national ISM manufacturing index which is a composite based on components.
Some subcomponents were even weaker than the headline reading.
The Philly Fed’s reading of new orders fell 35 points to -12.4. The shipments index 25 points, though it remained positive at 10.8 .
The employment index rose to 25.5 from 28.1 in the previous month, indicating that firms were still adding workers.
Big picture: The Philadelphia Fed index is one of several regional measures that reflect the health of the manufacturing sector.
A reading earlier this week of the New York region’s manufacturing sector showed it contracting for the second consecutive month, though it did reflect strength in new orders and shipments.
Market reactions: U.S. stocks SPX, +1.46% DJIA, +1.00% were set to open lower Thursday.