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LONDON (Reuters) – Euro zone manufacturing activity contracted for a seventh month in August as a continued decline in demand sapped optimism, a survey showed, likely strengthening expectations for monetary easing from the European Central Bank next week.

At their July meeting policymakers at the ECB all but promised to ease policy further as the bloc’s growth outlook worsens. An escalation in the U.S.-China trade war has increased fears for a global economic slowdown.

IHS Markit’s August final manufacturing Purchasing Managers’ Index (PMI) was 47.0, matching an earlier flash reading but well below the 50 level separating growth from contraction.

While an improvement on July’s 46.5, that month’s reading was the lowest since December 2012.

An index measuring output, which feeds into a composite PMI due on Wednesday and seen as a good gauge of economic health, rose to 47.9 from 46.9 but also spent its seventh month below the breakeven mark.Read More

By Ian Dei

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