French consumer confidence in July recovered more than anticipated, regaining some ground lost since the onset of the war in Iran.

The household confidence indicator, released by France's statistical office on Tuesday, rose from 84 to 86, driven by improved optimism regarding personal finances and living standards. This is the highest level since March and exceeds the median estimate of economists surveyed by one point.

Despite the improvement, the reading remains well below the indicator's long-term average of 100. The French economy experienced a contraction earlier this year, and data for the second quarter, due later this week, is expected to show only 0.2% growth.

Consumer spending has been weak as households grapple with accelerating inflation and the government's restrictions on fuel subsidies, aimed at curbing the large budget deficit.

Inflation expectations in France have eased. The European Central Bank noted last week that the "full impact of the energy shock has not yet fully materialized." Although the ECB held rates steady at its July meeting, refraining from a second consecutive increase to combat inflation, it highlighted upside risks to prices.

However, the French statistical office's inflation perception gauge shows a decline in the share of households reporting that prices have risen over the past year, and the gap between those expecting price acceleration and those who do not has narrowed significantly.

The survey was conducted between June 25 and July 20, with most responses concentrated in the first two weeks of that period, which predates the recent wildfires in the Bordeaux region.