LONDON (AFX) - Euro zone economic figures out this week will show whether the European Central Bank's decision to scale back its inflation outlook is well-founded, according to economists. In its August monthly bulletin, the ECB was more sanguine about the prospects for inflation as it raised concerns about the economic recovery. Economists expect inflation data across Europe to show prices largely under control. A rise in the year-on-year rate for French CPI is mainly due to unfavourable base effects in the energy and food sectors, economists at Schroder Salomon Smith Barney said. In addition, the July index should reflect the rise in doctors' fees and increases in public fares, SSSB said. However, the seasonal decline in manufactured goods prices due to summer discounting should still ensure a small decline in prices on a month-on-month basis, SSSB added. French payroll data is expected to show that employment growth slowed to a halt in the second quarter of 2002, Lorenzo Codogno at the Bank of America, said. "It would be the first flat reading since the third quarter of 2002," Codogno said. In the construction sector the situation should have further deteriorated, he noted. The service sector, which has performed quite well in the past, is also expected to show signs of weakness, Codogno said. Italian and French manufacturing data will give an idea of whether the euro zone recovery is on track. Recent German industrial output and manufacturing output data signalled a tentative rebound in the sector. SSSB said French manufacturing output is likely to have increased again in June, following a decline in June mainly due to the number of bank holidays in the month. French industrial output in May registered the first month-on-month fall since December 2001. Merrill Lynch economists also expect to see a rebound in June. The recent INSEE survey of manufacturing showed firms becoming increasingly positive about the past month's output, SSSB said. The German Zew index is likely to hold up despite the recent slump in the German Ifo business climate index. Merrill Lynch economists said that recent stability in equity markets is likely to prevent another fall in the Zew.