EURO-ZONE BUSINESS ACTIVITY POINTS TO RECESSION

New York, August 23- Euro-zone business activity continued to shrink at a steep pace in August, with a further deterioration in Germany sharpening fears that the bloc's crisis-wracked economy is heading back into recession.

The figures from data company Markit Economics, released Thursday, suggest more difficult times ahead for the 17-nation currency zone as its leaders fight to contain the region's sovereign debt crisis while the economy of the bloc withers and unemployment rises.

Europe's political leaders will be worried in particular about the signs of a slowdown in Germany, the region's largest economy, which may damp the nation's ability or desire to prop up troubled partners and could raise tensions further within the bloc. Greek Prime Minister Antonis Samaras will travel to Berlin on Friday to ask for more time to repair the finances of his bailed-out country, amid speculation Greece could be forced out of the euro zone altogether if it fails to meet targets set by its creditors.

German business activity in August fell at its fastest clip in more than three years, Markit said. The preliminary composite purchasing managers' index declined to 47.0 from 47.5.

The below-50 reading means activity shrank month-to-month in August for the fourth straight month, and suggests Germany's economy will struggle to grow in the coming quarters. Official data Thursday confirmed its economy grew 0.3% between April and June.

Germany's weakness in August suppressed business activity in the euro zone overall, Markit said. The composite PMI for the currency union was little changed at 46.6, from 46.5 in July, well within contraction territory. The lack of substantial improvement came despite France posting its least-negative reading in six months.

Those monthly readings cover the bulk of the third quarter, meaning the euro-zone economy looks likely to shrink markedly during the period. Following a contraction in the second quarter, that means the euro-zone economy would meet many economists' definition of recession—its second recession in three years.

"The August Markit euro-zone flash PMI reinforces the prevailing view of the economy dropping back into recession during the third quarter of 2012," said Rob Dobson, Senior Economist at Markit.

He said the PMIs are consistent with economic output falling by 0.5% to 0.6% during the period. Official data this month showed a 0.2% contraction in the second quarter.

"It would take a substantial bounce in September to change this outlook," Mr. Dobson said.

Germany's reading included a gloomy forward-looking signal for an economy highly geared to exports. The subindex for new orders from other countries fell at its steepest pace in more than three years, a reflection of the economic slowdown elsewhere in Europe and around the world.

"Hopes that German economic strength will aid recovery in the broader currency union were dealt a blow by its rate of economic contraction accelerating, and further signs that its export engine has slammed into reverse gear," said Mr. Dobson.

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