The Chicago Business Barometer, also known as the Chicago PMI, fell 1.2 index points to 46 in January.
Economists polled by the Wall Street Journal forecast a 48 reading.
Readings below 50 indicate contraction.
The index has fallen sharply from the November reading of 55.8, which was the highest level since May 2022, when business picked up following the end of the UAW auto strike.
The index is produced by the ISM-Chicago with MNI. It is released to subscribers three minutes before its release to the public at 9:45 am Eastern. It is the last of the regional manufacturing indices before the national ISM data for January is released Thursday.
So far, the regional Federal Reserve manufacturing surveys for January suggest weakening in the outlook for manufacturing, economists said. Economists expect the ISM factory index to decline slightly to 47.2% in January from 47.4% in the prior month. This would be the 15th consecutive month in contraction territory.