Euro zone sentiment unexpectedly rises for third straight month

BRUSSELS (Reuters) - Euro zone economic sentiment rose slightly for a third consecutive month in July to a new 10-year high, against expectations of a dip from June, data released by the European Commission on Friday said.

The sentiment indicator in the 19-country currency bloc rose to 111.2 in July from 111.1 in June and 109.2 in May, driven up by more optimism in the services sector.

The average forecast in a Reuters poll of 29 economists was for a decline to 110.8 after a surge in June to its highest level in nearly a decade.

The figure confirmed the robust recovery of the euro zone, with output expected to grow by another half percentage point in the second quarter after strong expansion in the Jan-March period. The preliminary estimates for output will be released on Tuesday.

Despite the unexpected rise in the sentiment, the Commission's business confidence index, which points to the phase of the economic cycle, fell to 1.05 in July from an upwardly revised 1.16 in June, its highest value since April 2011. Economists polled by Reuters had forecast a more modest decline to 1.12 in July.

The rise in the overall indicator of economic sentiment was driven mostly by more optimism in the services sector, the largest in the euro zone's economy, which rose to 14.1 points in July from 13.3 in June, while the manufacturing sector remained at 4.5 points, well above the long-term average of -6.4.

Sentiment among consumers was at -1.7 points in July, also well above the long-term average. It was the same as in June before an upwardly revision to -1.3 points.

Consumers' inflation expectations over the next 12 months fell to 11.7 in July from 13.0 in June while selling price expectations among manufacturers rose to 7.5 from 7.1 in June.

(Reporting by Francesco Guarascio; editing by Philip Blenkinsop)