March Sales, Output Are Early Casualties Of The Iraqi Conflict Purchasers' Gauge Negative Data from retailers raise new fears of double dip as consumers pull back.(A)

Byline: JED GRAHAM

Manufacturers cut production last month for the first time since November 2001 as the onset of war continued to pinch consumer spending.

The Institute for Supply Management said Tuesday its manufacturing index fell to 46.2% in March from 50.5% in February.

Sharp drops in output and new orders drove the overall index below the key 50 level that divides contraction and expansion for the first time since October and to the lowest point in 16 months.

The weak factory data and more lackluster reports from retailers show the economy has lost momentum and is in danger of contracting if the war in Iraq continues for long, economists said.

"The longer we go without actually reaching an end to Saddam, the more the economy is vulnerable," said David Littmann, chief economist at Comerica Bank.

A contraction in the factory sector doesn't mean the whole economy is shrinking. At 46.2, the ISM index is consistent with GDP growth of about 1.2%.