BRUSSELS: European business and consumer confidence firmed in August for a fifth month running, an EU survey showed on Friday, adding to a recent string of encouraging news for Europe's struggling economies.

The European Commission's economic sentiment indicator for the 16 nations using the euro single currency rose to 80.6 points from 76 points in July, continuing a gradual climb away from a record low 64.6 points in March.

The figure defied the expectations of analysts, polled by Dow Jones Newswires, who had predicted a more modest rise to 78 points.

"Recovery of the industrial confidence indicator continued, backed by a strong increase in production expectations and manufacturers' assessment of order books," the EU's executive body said in a statement.

However, it noted that "stocks of finished goods, production expectations and order books remain well below their long-term averages."

The long-term average rate, since 1990, is 100.

Among the larger EU economies, the greatest signs of improvement in confidence were seen in Britain, up 9.7 points, followed by the Netherlands, 7.6 points, and European economic powerhouse Germany which saw economic sentiment rise by 5.1 points in August.

There were also "noteworthy" gains in Poland, Italy and Spain.

The commission said the increase was due to a general improvement across the board, with only retail trade a little sluggish. The services sector gained considerably, while industry continued to climb out of the trough from March.

In the wider 27-nation European Union, the economic sentiment indicator rose to 80.9 points from 75 points in July.

Analysts said the figures bolstered hopes for a recovery.

"All in all, today?s indicators will be an important part of the ECB's (European Central Bank) briefing files for next week," said Carsten Brzeski at Global Economics.

"Central bankers will be facing a somewhat changed economic environment: the worst is over and the economy is stabilising," he said, but warned: "the labour market and a possible credit crunch are clear speed bumps on the road to recovery."

The commission's separate business climate indicator also continued to recover, improving for a fifth consecutive month with a rise to negative 2.21 points from minus 2.70 points in July.

Improvement was particularly strong in production trends, while "both order books and export order books continued to improve from the trough reached in June.

"Managers' opinion of stocks of finished goods improved as well, even though the level of stocks was still considered excessive," the commission said.

Recent data has shown European factory orders up, with the eurozone monthly trade surplus doubling.

Germany and France have lumbered out of recession and very nearly brought the rest of the eurozone with them.

However amid fears of double-dip recession, EU commission chief Jose Manuel Barroso warned that Europe's economy has not made a "firm recovery" from the crisis and the situation remains "very volatile."