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.
"Euro zone producers are suffering as the summer slump in factory production persisted into August. A marked deterioration in optimism about the year ahead suggests companies are expecting worse to come," noted Chris Williamson, chief business economist at IHS Markit.
The future output index, which gauges optimism about the year ahead, sank to 50.6 from 52.6 - its lowest reading since November 2012. Adding to the downbeat picture, factories reduced headcount for a fourth month.
New orders fell for an eleventh month and, as they have for a year, firms turned to completing backlogs of work to stay active.
