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BRUSSELS (Reuters) - Euro zone economic sentiment climbed to a near 10-year high in April against expectations of almost no change as confidence in all sectors improved and inflation expectations dampened, EU data showed on Thursday.
The European Commission's monthly survey produced an overall index for the 19-country currency bloc of 109.6 from 108.0 in March, the highest level since August 2007.
Economists polled by Reuters had expected a modest increase to 108.1 points.
A separate business confidence indicator, which indicates the phase of the business cycle, rose to 1.09 in April from 0.83 points in March, and above market expectations for no change.
ING chief economist Peter Vanden Houte said the data meant a euro zone growth rate of 2 percent was feasible, making it increasingly difficult for the European Central Bank to defend its expansionary monetary policy.
"Today’s figures, in combination with the French election results, will give further ammunition to the hawks in the ECB’s Governing Council. However, the political hurdles have not disappeared entirely," he said, pointing to the second round of France's presidential election and the prospect of Italian elections in the coming year.
The increase in sentiment was broad-based. It was up in every country except for a flat reading in Slovakia and declines in Cyprus and Slovenia. There was no data for Ireland.
The increase in overall economic sentiment was mainly caused by multi-year highs of optimism in industry, the services sector, among consumers and builders.
In Britain, which has now triggered its planned exit from the European Union, overall sentiment slightly improved. However, consumer confidence dipped during the month. Respondents were more downbeat about economic prospects, unemployment and savings.
Inflation expectations declined among consumers and manufacturers, reflecting a slide in oil prices and the sharp fall of inflation in March.
A flash estimate for April is due to be released on Friday. It is seen rising, albeit principally because of the late Easter this year, which pushed up prices of travel and hotels.
Rising inflation and solid growth would put pressure on the European Central Bank to end its monetary stimulus.
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Reporting By Philip Blenkinsop, editing by Pritha Sarkar