Activity in the euro zone's manufacturing sector slowed more sharply than first estimated in August, with Italy joining France in contraction, while German factories had their most sluggish month since September of last year.

By contrast, economies that have been hit hardest by the currency area's fiscal and banking crises showed signs of recovery, with activity in Greece expanding again, while Ireland's factories had their strongest month since late 1999.

However, fresh signs that the currency area's economy remains mired in stagnation, with manufacturers cutting jobs in August, will likely add to pressure on the European Central Bank to take more dramatic stimulus measures to boost demand and inflation.

The headline measure from data firm Markit's monthly survey of purchasing managers at more than 3,000 manufacturers fell to 50.7 from 51.8 in July, an indication that growth was very modest. A reading above 50.0 for the Purchasing Managers Index indicates an expansion in activity, while a reading below that level signals a contraction.

The final measure was slightly lower than the preliminary estimate of 50.8 released late last month.

Markit said the slowdown likely reflected the impact of rising tensions between the European Union and Russia over the future of Ukraine, as well as growing doubts about the effectiveness of euro-zone economic policy and its likely future course.

"The braking effect of rising economic and geopolitical uncertainties on manufacturers is becoming more visible," said Rob Dobson, an economist at Markit. "This is also the case on the demand front, with growth of new orders and new export business both slowing in August."

Activity in Spain's manufacturing sector slowed for the second straight month in August, a sign that the economic recovery may be losing some momentum.

Spain's economy grew at its fastest quarterly pace in six years during the second quarter, with gross domestic product increasing by 0.6% from the three months to March. The revival of the Spanish economy--the euro zone's fourth largest--has been one of the few positive developments for the currency area over the past nine months.

The slowdown in manufacturing suggests that the revival may ease in the third quarter, although their were indications in the survey that it is set to persist: manufacturers continued to hire additional workers, while new orders rose at the fastest pace since April 2007.

"Although output growth has eased from the sharp rates seen in the second quarter, a faster rise in new business and buildup of backlogs of work suggest that the current sequence of expansion will continue in coming months," said Andrew Harker, an economist at Markit.

A survey of Dutch manufacturers also released Monday recorded a similar slowdown in activity during August. By contrast, a survey of Irish manufacturers recorded a pickup an acceleration in activity unmatched since December 1999.

Write to Paul Hannon at paul.hannon@wsj.com

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