UPDATE 1-Euro zone July consumer morale is best in nearly 2 years

Tue Jul 23, 2013 11:54am EDT

Related Topics

* Consumer morale at highest level since August 2011

* Shoppers' confidence still below long-term average

BRUSSELS, July 23 (Reuters) - Euro zone consumer morale hit a nearly two-year high in July - still below the long-term average but chiming with expectations of a recovery in the second half of 2013.

Consumer confidence in the 17 countries using the euro improved to -17.4 points in July from -18.8 points in June, beating market expectations for a rise to -18.30 points, the European Commission said on Tuesday.

The reading was the best since August 2011, when it stood at -16.8.

In the whole of the European Union, consumer confidence recovered even faster to -14.8 from -17.5 in June.

Improving consumer confidence follows on from better manufacturing data this week and points to a recovery in the second half of this year to pull the euro zone out of its longest recession since creation of the currency in 1999.

Consumer optimism about the economy is still below the long-term average in the EU, however, and households will still struggle to support the expected recovery.

"Euro zone consumers continue to face high and rising unemployment, generally muted wage growth and tight fiscal policy," said Howard Archer, chief European economist at IHS Global Insight.

Consumer confidence rose around the world in the second quarter on more optimistic jobs trends, personal finances and spending intentions in the United States, China and Japan. However, Portugal was still had the most pessimistic consumers.

"The main good news for euro zone consumers is that the squeeze on their purchasing power is being limited by generally moderate consumer price inflation," Archer added.

Inflation in the 17-nation euro zone was 1.6 percent in June, below the European Central Bank's target of just under 2 percent. Economists expect inflation to remain below the target for the rest of this year.

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