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Euro zone business growth at slowest since start of 2015

[LONDON] Euro zone business growth was at its weakest since the start of last year in August, suggesting the bloc's already struggling economy is losing what little momentum it had, a survey showed on Monday.

To add to policymakers' concerns, the slowing came as firms offered deeper discounts despite rising input costs.

Markit's final composite Purchasing Managers' Index for the region was 52.9 in August, below a flash estimate of 53.3 and July's 53.2. That was its lowest since January 2015 but it has been above the 50 mark that divides growth from contraction since mid-2013. "While the overall picture is one of steady but sluggish 0.3 per cent growth in the third quarter, the revised figures indicate that the economy is losing rather than gaining momentum," said Chris Williamson, chief business economist at IHS Markit.

If realised, that growth forecast would match the median prediction in an August Reuters poll.

The European Central Bank will keep policy unchanged on Thursday but respond to pressure for further easing and announce an extension to its asset purchase programme by the end of this year, according to a Friday Reuters poll of economists.

At just 0.2 per cent in August inflation is nowhere near the ECB's 2 per cent target ceiling and the composite output price fell to 49.3 last month, under July's 49.8. "Inflationary pressures are also cooling amid intense competition. The survey data will fuel expectations that the ECB would prefer not to wait before injecting more stimulus into the economy," MrWilliamson said.

Growth in the bloc's dominant service industry also waned. Its PMI was 52.8, matching June's 17-month low and below July's 52.9 and flash estimate of 53.1.

With the outlook somewhat bleak, optimism among service firms was at its gloomiest since late 2014. The business expectations index registered 60.7, down from 60.9 in July.