The Euro zone Composite PMI for the month of August 2011 was recorded at 50.7, which is at two year low as Germany slows and Italy and Spain contract. PMI for the month of July was recorded at 51.1

The August month data suggests the second weakest rate of expansion since the recovery which began in August 2009.

New business saw a decline in the month of August for the first time in two years. Manufacturing new orders decreased at the fastest pace since June 2009. Service providers also saw the weakest increase in new work since November 2009.

A decline in the manufacturing output led to weaker output, first time since July 2009. The service sector also saw a rate of expansion which is at 23 months low.

France, Germany and Ireland reported growth of output in August (both in manufacturing and services), while Italy and Spain contracted

Output Figures

France          53.70       2 month high

Ireland          51.50      4 month high

Germany       51.30     25 month low

Italy             48.00     24 month low

Spain           45.00     25 month low

The Input prices eased in France, Germany, Italy and Spain compared to July. The input prices remained unchanged in Ireland.

The easing in input prices and sluggish demand also eased down the increase in average selling prices since November last year. Output price increased in France and Germany but at a lower pace, Spain and Ireland reported substantial price discounting, while prices in Italy fall slightly for the first time in a year.

Chris Williamson, Chief Economist at Markit said: “The final Markit Eurozone PMI came in even weaker than the flash estimate, pointing to the slowest rate of economic growth for two years as the region’s recovery almost ground to a halt.

“The turnaround in the Eurozone economy has been alarmingly abrupt since the surging pace of growth seen earlier in the year. Incoming new business fell in August for the first time since the recovery began two years ago, and forward-looking indicators, such as business optimism in the service sector and the ratio of manufacturing orders to inventories, point to a further deterioration in coming months.

“Furthermore, all of the largest member states are now feeling the pain of weakened demand and uncertainty about the months ahead, as austerity measures take hold and the region’s financial crisis continues to escalate.

“The risk of the Eurozone slipping back into contraction has therefore risen. The PMI suggests that economic growth in the third quarter is unlikely to improve on the 0.2% seen in the three months to June, and a contraction in the final quarter looks a distinct possibility unless business and consumer confidence improve noticeably in coming months.”