Spain's service sector activity shrank at its fastest pace since July 2009 last month, and companies grew less optimistic about the outlook for the coming year.

The purchasing managers' index (PMI) for companies in Spain's services sector, which accounts for about 70 per cent of the economy, fell to 44.8 in September from 45.2 in August. September's result was below a forecast for 45.0.

It was the third month in a row that the services sector index has held below the 50 line that divides growth in activity from contraction.

The data echos a survey out on Monday covering Spain's manufacturing sector, where factory activity contracted at its fastest rate in over two years in September.

"Economic uncertainty in Spain and across the euro zone impacted negatively on the Spanish service sector in September as an unwillingness among clients to commit to new projects resulted in marked declines in new business and activity," said Andrew Harker, economist at data provider Markit.

The PMI survey showed that businesses were more concerned about the outlook for the year ahead than a month ago. The business expectations index fell to 58.2 from 59.4 a month earlier, its lowest level since October.

Companies were forced to slash costs further in September in an attempt to fuel demand, with the prices charged index falling to its lowest level since January and holding below the 50 mark for the 38th consecutive month.

Input prices rose for the 19th month running, but at their slowest pace since March 2010.

The outlook for employment remained poor. The employment index showed companies continued to lay off workers for the 43rd consecutive month.

Spain has the highest unemployment rate in the European Union at close to 21 per cent. Data yesterday showed the September jobless rate jumped by 2.32 per cent, marking the end of a busy tourist season and dampening hopes of a third-quarter fall in the unemployment rate.

Reuters