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Italy's services sector shrinks in Oct at fastest rate since Jan 2021 -PMI

ROME (Reuters) - Italy's services sector contracted for a second month running in October and at the steepest rate for almost two years as new business plunged amid strong price pressures, a survey showed on Friday.

S&P Global's Purchasing Managers' Index (PMI) for Italian services fell to 46.4 in October from 48.8 in September, dropping further below the 50 level that separates growth from contraction and marking the lowest reading since January 2021.

The result was well below the median forecast of 48.5 in a Reuters survey of 13 analysts and will strengthen fears that the euro zone's third largest economy is heading for recession.

The new business sub-index for the sector sank to 45.7 from 49.1 the month before.

The PMI for Italy's smaller manufacturing sector, released on Wednesday, showed contraction for a fourth month running in October, with activity posting its steepest decline since May 2020 when the economy was struggling with COVID-19 lockdowns.

The composite Purchasing Managers' Index combining services and manufacturing stood at 45.8 in October, down from 47.6 in September and pointing to a deepening slump.

The October reading was the lowest since December 2020.

Italy's economy expanded by a stronger than expected 0.5% in the third quarter from the previous three months, data showed on Monday, but analysts and the Italian Treasury expect a contraction in the fourth quarter as firms and households struggle with soaring energy costs.

(Reporting by Gavin Jones, editing by Susan Fenton)