Spanish services sector activity grew last month at the slowest pace since January, with businesses citing concerns inflation will impact profits and consumer demand, according to the results of a survey out this week.

S&P Global’s Purchasing Managers’ Index (PMI) of services companies, accounting for around half of the country’s economic output, declined to 50.6 in August, from July’s reading of 53.8. The 50-mark separates growth from contraction.

This is the lowest reading since January, when activity registered a contraction at 46.6, Reuters news agency reports.

“Spain’s economy headed towards stagnation during August as the service sector followed manufacturing by posting only marginal growth. High inflation and general market instability again dominated company reports on their current situation and fears that these will continue to negatively impact on clients in the months ahead adds to concerns that the economy is heading into a challenging winter and possible recession. Indeed, new business volumes have already turned negative, and hiring growth is subsequently being held back,” said S&P Global Economics Director Paul Smith.

Business managers within Spain’s services sector are concerned soaring inflation will affect customer demand, he went on to say.

Consumer price inflation in Spain decelerated to 10.4% year-on-year last month, the Reuters report adds, down from 10.8% the month before. Figures like this haven’t been seen since the 1980s.

The results of another survey published at the end of last week revealed Spain’s factory activity marginally contracted in August. This was predominantly due to inflationary pressures and macroeconomic uncertainty impacting demand.