Spain's services sector sinks deeper into the red in September - PMI

MADRID (Reuters) - Spanish service sector activity shrank again in September as business and travel restrictions related to a surge of coronavirus cases weighed on the country's economy, a survey showed on Monday.

Markit's Purchasing Managers' Index (PMI) of services companies, which account for around half of the country's economic output, fell to 42.4 in September from 47.7 in August. The 50 line separates growth from contraction.

The indicator had briefly surpassed 50 in June and July when the country emerged from a three-month lockdown. But new outbreaks of the coronavirus and travel restrictions imposed by various European countries have ravaged the summer tourism season.

"September’s services data highlights how the recovery from the most severe impacts of COVID-19 earlier in the year is faltering," said Paul Smith, economics director at IHS Markit.

A sister survey of Spanish manufacturing activity on Thursday showed a pick up to 50.8 in September from 49.9 in August.

After the lockdown ended in late June, Spain's economy gradually revived in July.

The Spanish economy contracted 17.8% in the second quarter, the biggest fall on record and one of the deepest downturns in the region.

Even though the economy is expect to rebound in the third quarter, "the PMI data showcase that the recovery is unlikely to be sustained at anywhere near strong enough rates to help close the considerable output gap," Smith said.

(Reporting by Inti Landauro; Editing by Toby Chopra)