Euro zone economic confidence hits four-year high in July

The European Commission's monthly economic sentiment indicator published on Thursday stood at 104.0 in July, up from 103.5 in June and above the 103.3 average forecast by economists in a Reuters poll.

Business morale increased to 0.39 points, its highest level since May 2014.

"Improved euro area sentiment resulted from higher confidence in industry, services and retail trade, which was only partially outweighed by lower consumer confidence," the Commission said in a statement.

Overall sentiment increased in Germany, France, the Netherlands and Spain, but it dipped slightly in Italy.

Greek sentiment fell by 9.4 points and its level has been below 100 for eight consecutive months.

The overall numbers offer a slightly contrasting view to that of last week's Markit composite flash purchasing managers' index, which fell in July, albeit from a four-year high in June.

The survey results came after a provisional bailout agreement was struck between Greece and the euro zone as well as a nuclear deal with Iran, with oil prices also declining for most of the month.

Peter Vanden Houte, chief euro zone economist at ING, said that the euro zone economy seemed to have become more immune to troubles in Greece than a few years ago. But he added that the current level of sentiment was compatible with quarterly growth of 0.4 percent - "good but not brilliant".

Arguably of most importance for the European Central Bank, which launched a money-printing program this year, was that consumers' inflation expectations slipped in July, ending a run of five straight monthly increases.

"Inflation might well dive below zero again on the back of the renewed fall in oil prices, a development the ECB is not likely to welcome as it also might push inflation expectations down again," Vanden Houte said.

He added the ECB seemed more inclined to step up its quantitative easing program than to consider a premature tapering.

(Reporting by Francesco Guarascio; editing by Philip Blenkinsop/Hugh Lawson)