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Spanish services activity shrinks in Oct as prices weigh -PMI

MADRID (Reuters) - Activity in the Spanish services sector contracted for the second straight month in October, weighed down by high inflation again, a survey showed on Friday.

S&P Global's Purchasing Managers' Index (PMI) for Spain's services sector, which accounts for around half of Spanish economic output, rose to 49.7 last month from 48.5 in September, but stayed below the 50.0 mark that separates growth from contraction.

"New business was again down as clients continued to place on ice any previous plans to increase their own spending and investments," S&P Global Economics Director Paul Smith said.

"The net impact was falling levels of output and new business, heaping further stress on business operations at a time of rising costs and challenges in passing these on to clients," Smith said.

However, the survey showed a slight increase in staff hiring in the services sector last month.

A sister survey of factory activity released on Wednesday showed a steep contraction in October, with output and new orders dropping at the fastest pace since the height of 2020's COVID-19 lockdowns and many companies choosing to cut jobs.

Spain's consumer prices in the year to October rose 7.3% - the slowest pace since January, but still way above normal inflation levels. Economic growth slowed down sharply to 0.2% in the third quarter from a 1.5% expansion in the second quarter.

(Reporting by Andrei Khalip; Editing by Susan Fenton)