(Corrects month in headline to August, not July)
* Euro zone composite PMI falls to 52.8, missing forecasts
* PMI points to 0.3 pct third quarter GDP growth
* Firms cut prices for 29th month
By Jonathan Cable
LONDON, Aug 21 Euro zone private business growth
slowed more than expected in August, despite widespread price
cutting, as manufacturing and service industry activity both
dwindled, a survey showed on Thursday.
Euro zone economic growth ground to a halt in the second
quarter, dragged down by a shrinking economy in Germany and
a stagnant France, even before any impact from sanctions imposed
on and by Russia over Ukraine.
Markit's Composite Purchasing Managers' Index (PMI) will
provide gloomy reading for the European Central Bank (ECB),
suggesting its two biggest economies are struggling like smaller
Based on surveys of thousands of companies across the region
and a good indicator of overall growth, the Composite Flash PMI
fell to 52.8 from July's 53.8, far short of expectations in a
Reuters poll for a modest dip to 53.4.
However, readings above 50 still indicate expansion. Markit
said the data point to third-quarter economic growth of 0.3
percent, matching predictions from a Reuters poll last week.
"We are not seeing a recovery taking real hold as yet. We
are not seeing anything where we look at it and think 'yes, this
is the point where the euro zone has come out of all its
difficulties'," said Rob Dobson, senior economist at Markit.
The euro zone has also yet to feel the full effect of
escalating tensions with Russia.
Europe stung Moscow with economic sanctions, prompting a
tit-for-tat response from Russian President Vladimir Putin, over
the Kremlin's support for rebels in eastern Ukraine.
The composite PMI in Germany - Russia's biggest trade
partner in the European Union which has already seen exports to
the country plunge in the first half of the year - fell to 54.9
For France, the euro zone's second largest economy, the
Composite PMI rose from 49.4 to the break-even mark at 50.
Struggling to support growth while battling the threat of
deflation, the ECB is providing another round of temporary
access to cheap cash for banks. There is also a one-in-three
chance it embarks on an asset purchase programme next year, a
Reuters poll showed.
Consumer prices in the euro zone rose just 0.4 percent on
the year in July, the weakest annual rise since October 2009 at
the height of the financial crisis, and well within the ECB's
"danger zone" of below 1 percent.
Worryingly, according to the composite output price index
firms cut prices for the 29th month - and at a faster rate than
in July. It dipped to 48.9 from 49.0.
Also of concern, suggesting factories do not expect things
to improve anytime soon, manufacturing headcount fell at the
fastest rate in nine months. The sub-index dropped to 49.1 from
Optimism about the future also sank among services firms -
the business expectations index plummeted to 58.6 from 61.7, its
lowest reading in a year.
The manufacturing PMI fell to 50.8 from 51.8, below the
consensus forecast for 51.3 and its lowest since July 2013. The
output index, which is used to calculate the composite PMI, sank
to 50.9 from 52.7. The services PMI fell in line with
expectations to 53.5 from 54.2.
(Editing by Toby Chopra)