WASHINGTON, April 3: The vast US services sector, struck by fear in the run-up to war in Iraq, shrank in March for the first time in more than a year, an industry survey showed on Thursday.

The Institute for Supply Management (ISM) said its index of non-manufacturing activity, based on a survey, slumped to 47.9 points in March from 53.9 points in February.

It was the first drop below 50 points, the line that separates contraction and expansion, since January 2002.

“The domestic economy seems to be softening,” BMO Financial Group economist Sal Guatieri said.

“We already knew manufacturing has been weak, undermined by a soft global economy and weak exports,” Guatieri said.

“Now the services industries are also being whacked by all the uncertainties relating to war. There is really no good news in the report,” he said.—AFP