U.S. services sector activity slowed to a more than 1-1/2 year low in March amid a sharp drop in new orders, underscoring slowing economic growth that supports the Federal Reserve's decision to halt further interest rates increases this year.

The Institute for Supply Management (ISM) said on Wednesday its non-manufacturing activity index fell 3.6 percentage points to 56.1, the lowest since August 2017. A reading above 50 indicates expansion in the sector, which accounts for more than two-thirds of U.S. economic activity.

The economy is losing momentum as stimulus from the Trump administration's $1.5 trillion in tax cuts diminishes. It is also facing headwinds from slowing global growth, Washington's trade war with China and uncertainty over Britain's exit from the European Union.

Last month's sharp slowdown in services industry activity reflected a 7.3 percentage points decline in the production subindex. Activity was also weighed down by decreases in new and export orders measures.