Spanish services sector contracts in Sept after eight months of growth -PMI

People carry shopping bags at a shopping district in Madrid, Spain, March 3, 2016. REUTERS/Andrea Comas

MADRID, Oct 5 (Reuters) - Activity in Spain's services sector contracted in September for the first time since January, with businesses finding market conditions increasingly adverse, a survey showed on Wednesday.

S&P Global's Purchasing Managers' Index (PMI) of Spanish services sector, which accounts for around half of Spain's economic output, fell to 48.5 last month from 50.6 in August and below the 50.0 mark that divides growth in activity from contraction.

It was the lowest reading since January, when the index reading was at 46.6 as activity was hit by COVID-related restrictions.

"Unsurprisingly, elevated inflation continues to undermine market demand and client budgets, with discretionary spending on services related to hotels & restaurants notably lower," S&P Global Economics Director Paul Smith said in a note.

"Uncertainty about the future is also undermining sales and demand, whilst also seeping into business decision-making within the services economy," he added.

Spanish consumer price inflation slowed to 9% year-on-year in August from 10.5% in August - rates not seen since the late 1980s.

A sister survey on Monday showed Spanish factory activity contracted in September for a third consecutive month as inflationary pressures and macroeconomic uncertainty weighed on demand.

Central bank governor Pablo Hernandez de Cos said on Tuesday that the Spanish economy had slowed in the third quarter and conditions pointed to "a general downward revision of the growth outlook for the following quarters".

Reporting by Inti Landauro; Editing by Susan Fenton

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