According to a survey published on Thursday, factory activity in Spain contracted again in October as high interest rates and a drop in business confidence impacted sales.

The HCOB Purchasing Managers' Index (PMI) for Spain's manufacturing, compiled by S&P Global, stood at 45.1 in October, a fall from September's reading of 47.7. This was also the seventh straight month below the 50-level dividing growth from contraction and the lowest since October 2022, Reuters reports.

"These PMI manufacturing figures are downright nasty. Output is hitting the brakes hard, and new orders have taken a steep slide from the previous month. Part of it was due to weak external demand. But it looks as if domestical clients are also stepping back from buying manufactured goods. In addition, purchases took a hard hit, underscoring the fragile situation of the sector," stated Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

"Spain's manufacturing sector is stuck in a recession pit and digging deeper. With the updated PMI numbers considered in our GDP nowcast, manufacturing could plummet by 2% in the fourth quarter. And after the drops in the two quarters before, we could end up in the red for nine months straight since April by the end of the year," HCOB added.

Furthermore, businesses reduced staffing levels for the fourth month in five, according to S&P Global.

However, despite the weakness in the country's manufacturing sector, Spain's GDP grew at a faster-than-forecast 0.3% between July and September. Consequently, Spain's growth is surpassing the majority of large European Union economies, the Reuters report continues.

In addition, S&P Global's survey on services, which make up around half of the economy, revealed almost constant growth so far in 2023.