Factory activity in Spain grew in June at the slowest pace since January 2021 as a challenging economic environment, notably price increases, weighed on demand, a survey showed on Friday.

S&P Global's Purchasing Managers' Index (PMI) for manufacturing stood at 52.6 in June, down from 53.8 in May, according to the survey. The June reading was the lowest since January 2021 when it was at 49.3. The indicator in June was still above the 50.0 level that marks growth in activity.

A drop in new orders was the most notable feature of the June survey, S&P Global said, attributing the decline to the instability in Europe and long-running inflationary pressures.

“The latest data will therefore add to very real concerns of stagflation," S&P Global's economist Paul Smith said.

Rising Spanish inflation, which surpassed 10% in June for the first time since 1985, and uncertainty related to the war in Ukraine prompted Economy Minister Nadia Calvino to slash her economic growth outlook for this year to 4.3% from 7%, after growth of 5.1% in 2021.

Spain's central bank has also lowered its growth expectation for the year, to around 4%. (Reporting by Inti Landauro; Editing by Susan Fenton)