BRASILIA, July 28 (Reuters) - Brazilian industry in July operated at its hottest level in almost seven years as it continued to recover from the worst of the COVID-19 pandemic, a survey showed on Wednesday, while confidence in the sector hit a six-month high.

Capacity utilization rose 0.7 percentage points in the month to 80.1%, according to the think tank Fundacao Getulio Vargas. That is the highest since November, 2014, reflecting how much of the sector's long-term slack has been taken up recently.

A high capacity utilization rate often signals rising inflationary pressures too.

Industrial confidence rose in July for a third consecutive month, although businesses said supply issues and the drought-fueled energy crisis could become more serious concerns in the coming months.

The FGV's national industrial confidence index for July rose 0.8 points to a seasonally adjusted 108.4 from 107.6 in June, according to preliminary figures, the highest since January.

"Companies still face input shortages, the possibility of energy rationing and high uncertainty, which limited a more expressive increase in confidence for the months ahead," said Claudia Perdigão, an economist at FGV.

That said, the FGV's expectations index and current conditions index both hit six-month highs in July. (Reporting by Jamie McGeever; Editing by Alison Williams)