AP Business Writer
FRANKFURT, Germany (AP) -- After a year and a half of recession, Europe's battered economy could finally be showing signs of life.
It's not the kind of recovery that calls for a big celebration. Any upswing will be a slow and arduous climb -- up a slope strewn with high unemployment and scarce credit for businesses.
But signs of improvement are there. On Thursday, a German index of business confidence rose for the third month in a row. Meanwhile, surveys of purchasing managers in the euro area indicate manufacturing activity edged back into growth territory in July for the first time in 18 months.
And there are other indications that Europe has bottomed out.
Germany's central bank, the Bundesbank, says the country's economy -- Europe's biggest -- expanded "strongly" in the April-June period. Automaker Daimler AG says it expects to see the continent's sagging car market start to recover toward the end of the year. In the No. 2 euro economy, France's Insee index of consumer confidence ticked up in July to 82 from 79 the month before.
News like this has raised hopes that economic growth figures could be flat or slightly positive when they come out for the April-June period on Aug. 14.
That would end a string of six straight quarters of contraction in the 17 European Union countries that use the euro currency.
"Contrary to widespread market perceptions, the eurozone recession ended when the snow melted last Easter," Berenberg Bank chief economist Holger Schmieding wrote in a note Thursday. He is forecasting 0.2 percent growth for the second quarter and 0.3 percent for the current, third, quarter.
The eurozone is the second-largest economy after the United States, with 9.5 trillion euros ($12.5 trillion) in economic output last year. It's a major trading partner with the U.S., close neighbor Britain and with Asia. Losses in Europe have been a drag on otherwise stellar earnings for U.S. carmakers. Ford Motor Co. lost $348 million there in the second quarter and General Motors lost 110 million euros -- high but still smaller than earlier quarters.
An improvement can't come fast enough for the auto industry. Even low unemployment of only 5.3 percent of hasn't moved Germans to buy new cars. Sales fell 8.1 percent over the first six months of the year.
What's needed is a better consumer mood that can outweigh negative headlines and fears about the future, says Fritz Kuckartz, who runs his family's 60-year-old Renault dealership in Aachen.
"Purchase decisions don't just depend on the unemployment number," Kuckartz said. "It depends on the person's situation and the entire political and news media environment. The key factors in our experience are disposable income and the general outlook for the future. "
Manufacturers have cut their prices "and the customers still can't decide. "
Only a "better fundamental mood" can outweigh negative headlines and worries, he said.
The signs of stabilization come a year after European Central Bank head Mario Draghi did much to halt the financial market crisis in Europe with a forceful statement on July 26, 2012 at a London investor conference that the bank would "do whatever it takes" to save the euro and that "believe me, it will be enough."
The bank followed with a plan to purchase unlimited amounts of government bonds issued by indebted governments. The aim was to drive down the borrowing costs that threatened Spain and Italy with financial collapse. No bonds have been bought. But the mere prospect of central bank purchases sent interest costs lower. Yields on Spanish 10-year bonds have fallen to 4.65 percent from over 7 percent ahead of Draghi's speech.
That cut financing costs for indebted countries such as Spain and Italy and reduced the threat they would need a bailout Europe couldn't afford.
European leaders also started work last summer on centralizing the regulation of banks to prevent bailouts from adding to government debt.
As a result, the market crisis eased. But the slack economy remained.
It stagnated as governments cut spending and raised taxes to reduce debt. Now, much of the cutting is done -- and chastened eurozone leaders are now willing to let countries such as France and Spain balance their budget more slowly.
Nonetheless a real recovery -- enough to cut into the eurozone's unemployment rate of 12.2 percent -- would need economic growth of 1.5 percent a year or more. And that isn't in view yet. Ernst & Young forecasts 11.6 percent unemployment -- out as far as 2017.