The index, which covers business conditions in the industrial belt of Indiana, Illinois and Michigan, fell 4.4 points to 52.4, pushed by a sharp decline in new orders and production.
Declines were also noted in indexes measuring backlog of orders, inventories, and employment.
The report said the diffuse business barometer fell from an 11-month high in March to 52.4.
Numbers above 50 represent growth but growth was faster in February, when the diffuse index stood at 56.8.
"After a strong start to the year, the Business Barometer was knocked back by steep declines in new orders, production and another disappointing dip in order backlogs," the monthly report said.
The production index dropped from 60.2 to 51.8, the report said. The new orders index fell almost as far, dropping from 60.2 in February to 53 in March.
The employment index, marking the number of employees, fell from 55.7 to 55.1.
The backlog of orders index fell from 50.9, showing slow growth, to 45, showing a contraction.
The report, which is produced by the Institute of Supply Management-Chicago Inc. and Deutsche Borse AG, also noted slight growth in inventories -- at 50.1 -- turned negative with a March reading of 41.