ISM-New York Inc. said the area's Purchasing Managers Index dropped to 49.7 percent in the survey in which numbers below 50 indicate a contraction, while numbers above indicate growth.
June's PMI was 3.8 percentage points below May's PMI of 53.5 percent.
For the New York area, the New Orders Index fell 12.3 percentage points to 47.9 percent, a contraction in that index for the first time since April 2009.
The Production Index registered 51 showing growth, and the Employment Index, which measures the number of people employed, came in at 56.6 percent.
Respondents to the survey also make general comments, which ranged "from continued optimism to concern that demand may be softening due to uncertainties in the economies in Europe and China," ISM-New York said.
Out of 18 business sectors in the state, seven showed growth in June, including furniture, printing, fabricated metal, electrical equipment and appliances and components, the report said.