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Euro zone business activity still stuck in a rut -PMI

LONDON, Oct 24 (Reuters) - Euro zone business activity barely expanded in October as demand shrank, according to a survey on Thursday which will make disappointing reading for outgoing European Central Bank President Mario Draghi.

In September, the ECB cut its deposit rate deeper into negative territory and said it would revive its bond-buying programme indefinitely to cut borrowing costs and stimulate investment and growth in the euro zone.

But October's preliminary Purchasing Managers' Indexes suggests those measures have yet to influence businesses in the private sector.

IHS Markit's flash composite PMI, seen as a good guide to economic health, was 50.2, just above September's more than six-year low final reading of 50.1 but still perilously close to the 50 mark that separates growth from contraction and below expectations in a Reuters poll for 50.3.

"The euro zone economy started the fourth quarter mired close to stagnation, with the flash PMI pointing to a quarterly GDP growth rate of just under 0.1%," said Chris Williamson, chief business economist at IHS Markit.

"The survey indicates that Mario Draghi's tenure at the helm of the ECB ends on a note of near-stalled GDP, slower jobs growth, near-stagnant prices and growing pessimism about the outlook."

The GDP projection from the PMI was below the 0.2% predicted in a Reuters poll last week and gives little hope for a turnaround anytime soon. An index measuring new business rose only slightly to 49.1 from 48.7, chalking up its second month below the breakeven mark.

A PMI for the bloc's dominant service industry nudged up to 51.8 from September's 51.6, which had been its lowest reading since the start of this year. Economists had expected 51.9.

With the survey painting a gloomy picture, optimism among services firms was at its weakest since mid-2013. The business expectations index sank to 56.5 from 58.6.

Manufacturers also had a bad October and activity contracted for a ninth straight month, the PMI showed. It held steady at September's 45.7, a low not seen in seven years and missing the median expectation for 46.0.

The manufacturing output index, which feeds into the composite PMI, was 46.2, just pipping last month's 46.1 but its ninth sub-50 reading in a row.

October's weak results were despite factory gate prices falling for a fourth month. The output prices index was 48.9 compared to September's 48.6.

An overwhelming majority - 95% of economists who answered an additional question in last week's Reuters poll - said the ECB's stimulus package would not significantly help in bringing inflation back to its 2% target ceiling.

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(Reporting by Jonathan Cable; Editing by Toby Chopra)