(by Emily Backus)Rome, July 30 - Italy led confidence growth among eurozone businesses in July, boosting recovery hopes in the recession-plagued country on Tuesday. The Economic Sentiment Indicator index showed optimism in economic prospects rose 2.9 points among Italian businesses from June to July, more than double the eurozone average of 1.2 points. By contrast, German businesses saw confidence rise by just 0.7 points. But Germany's confidence hit 100.5 points, whereas even after Italy's impressive surge, it only reached 89.5, yet Italian business confidence has been creeping up all year. In February it stood at 80.8. Interest rates on bonds also appear to support hopes that the eurozone's third largest economy may have left sovereign debt crisis behind. Yields were down on both 10-year and 5-year paper in a bond auction on Tuesday, while the treasury successfully placed 3.75 billion euros of 10-year bonds with a fixed interest rate of 4.50% The spread between Italian and German 10-year bond rates dipped to 274 basis points on Tuesday, and has remained under 300 for most of the year. The spread is a key measure of Italy's borrowing costs and of investor confidence in the country's ability to weather the eurozone crisis, and soared past 500 basis points in 2011, a key factor in then premier Silvio Berlusconi's choice to step down. A series of austerity measures to cut government spending, reform pensions and raise taxes did boost investor confidence and tame the spread, but also spelled political doom for the technical government headed by economist Mario Monti, who bowed to general elections in February. The Italian government has predicted that Italy will begin to pull out of its painful double-dip recession by the end of this year, although the prediction has met scepticism by the chief of the industrialist's confederation Confindustria. Confindustria President Giorgio Squinzi has repeatedly called attention to Italy's contracting manufacturing figures, however Italian statistical agency Istat reported last week that confidence among Italian manufacturers is rising even faster than in other sectors. Unemployment climbed to a new record high of 12.2% in May, Istat reported on July 1. The national statistics agency said the seasonally adjusted unemployment figure had not been so high since the current calculation method was introduced in first quarter of 1977. It added that 3.14 million people were unemployed in May, up 56,000 on April and almost half a million, 480,000, on the same month in 2012. The only positive note was that unemployment among 15-to-24-year-olds fell to 38.5%, down 1.3% on April, although this still meant close to four in 10 young people in this age bracket were jobless. A study by the economic development group Svimez predicted in late July that the Italian economy this year would contract 1.7% in the centre-north and 2.5% in the south. Svimez said consumption in the south is expected to drop 4.2% compared to 2.8% for the rest of the nation, while investments in southern Italy will sink 11.3% this year compared to a 5.4% in the central-northern area. Wages meanwhile are forecast to slip 1.4% in the centre-north compared to 2% in the South, and exports are forecast to dip 1.1% in the centre-north compares to a 2% drop in the south. However earlier this month Istat reported that purchasing power in Italian consumer households increased for the first time, quarter on quarter, since the fourth quarter of 2010, with gross disposable income in real terms increasing 0.5% in the first quarter of 2013 over the previous quarter. On an annual basis, however, gross disposable incomes of consumer households had still fallen by 2.4% compared to the first quarter of 2012, and had lost 9.7% in real terms since the beginning of 2008.