UPDATE 1-Key euro zone inflation gauge back within sight of record lows as ECB concerns grow

* Euro zone inflation indicator back near record lows

* Weak growth outlook drives inflation expectations down

* Deflation fears starting to creep in - analysts (Updates throughout with charts, comment, context)

LONDON, Oct 2 (Reuters) - A key market gauge of long-term inflation expectations for the euro zone fell on Wednesday to within sight of record lows, re-igniting concerns that even the ECB’s latest stimulus measures will fail to lift inflation towards the near-2% target.

Having risen initially after the European Central Bank’s Sept. 12 easing measures, which included a rate cut and open-ended asset purchases to lift growth and inflation, market inflation expectations have resumed their decline.

That’s a discouraging sign for the ECB which tracks the indicator for setting policy.

The five-year, five-year breakeven forward, which measures expected inflation over a five-year period that begins five years from today, has dropped to 1.1434%.

It has tumbled 17 bps since the ECB’s last meeting and is back towards the record lows hit in June of around 1.13%.

Inflation in the euro area has undershot its target since 2013, and concern is growing that the ECB’s room for manoeuvre, after trillions of euros in stimulus, is now limited.

The latest lurch lower in inflation expectations follows another around of weak economic data globally.

On Tuesday, the Institute for Supply Management (ISM) said its U.S. manufacturing activity index fell in September to its lowest in a decade.

“The U.S. manufacturing ISM raises significant concern about a global economic slowdown, so you have to ask where is the inflation going to come from?,” said Chris Scicluna, head of economic research at Daiwa Capital Markets.

“We are already at sub-trend growth in the euro area, so there’s little hope of getting growth and inflation higher if the U.S. economy struggles.”

Euro zone inflation slowed to just 0.9% in September from 1.0% a year earlier, data on Tuesday showed.

Last week’s dismal activity data from Germany has also led to a further reassessment of inflation prospects.

“We see ongoing pressure on the five-year, five-year forward since the PMIs last week and when you benchmark this against other indicators such as oil prices, you can see the move is striking,” said Commerzbank rates strategist Michael Leister.

“We’ve had a repricing from reflation towards low inflation and now the move over the past two weeks suggests that the market is again starting to attach some probability to a deflationary recession similar to what we saw in 2015.”

Deflation - where prices fall - is not yet the base case scenario for most economists. But they cite signals from broad inflation indicators as cause for concern - Citi’s euro zone inflation surprise index for instance is deeply negative and pointing downwards.

“Deflation is not my base case but it’s fairly possible to imagine that world,” said Ross Hutchison, a fixed-income fund manager at Aberdeen Standard Investments. “The ECB would be worried about that - it was the reason why they launched QE (quantitative easing) in 2015.”

Reporting by Dhara Ranasinghe; editing by Sujata Rao and Susan Fenton