NEW YORK (Reuters) - The U.S. service sector shrank further in February but by less than expected, according to a report released on Wednesday. The Institute for Supply Management said its nonmanufacturing index came in at 41.6 in February versus 42.9 in January. The level of 50 separates expansion from contraction in the index, which dates back to July 1997. Economists had expected a reading of 41.0, according to the median of 69 forecasts in a Reuters poll ranging from 37.0 to 44.0. The service sector represents about 80 percent of U.S. economic activity, including businesses such as banks, airlines, hotels and restaurants. (Reporting by Burton Frierson; Editing by James Dalgleish)

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