The Federal Reserve Bank of Philadelphia said Thursday that its index of factory activity fell to 5.7 in July from 15.2 the previous month. Any reading above zero indicates that manufacturing is expanding.
The index has been stuck in single digits for all but one month this year. That compares with a recent high of 40.2 in November.
Manufacturers are recovering from the setbacks of a brutal winter, a strong dollar hurting exports and cheaper oil prices cutting into equipment and material orders by energy firms.
"Overall, we see manufacturing activity as still limping after being hit hard from the oil price shock," said Derek Lindsey, an analyst at the bank BNP Paribas.
Measures of new orders and shipments fell this month, yet remained positive. Measures for employment and inventories dropped below zero, a sign of contraction. Still, manufacturers were slightly more optimistic about growth over the next six months.
The slippage in growth this month might also reflect seasonal factors. The manufacturers surveyed said their activities normally increase in the spring and autumn but slip in the winter and mid-summer.
The survey covers manufacturing in eastern Pennsylvania, southern New Jersey and Delaware.
Other indicators point to relatively limited — if any — gains for manufacturers, despite solid hiring in the broader economy and recent surges in home sales.
The Federal Reserve said Wednesday that factory production was unchanged in June for a second straight month. Production at auto plants fell last month, but the decline was offset by greater output of furniture and chemicals.
Still, there are signs that manufacturers are recovering from the recent drags on the sector due to oil prices, limited exports and winter weather that shut down assembly lines.
Factory production rose 1.4 per cent at an annual rate in the April-June quarter, after shrinking 0.8 per cent in the first quarter.