Western Europe's car market has delivered encouraging signs that it is stabilising, according to auto forecaster JDPower LMC.

The British-based firm says that stronger demand in Germany and Spain contributed to respectable auto sales from a year ago, with consumers snapping up 1.3 million cars in July.

That figure represents a drop of just 0.1 per cent on the previous year, suggesting that the problems affecting demand in the industry may finally be beginning to fade.

On a seasonally adjusted basis, July's sales were the second-highest in the year to date, according to JDPower.

'For the first time since late 2002, when Italian incentives artificially boosted sales, July represented more evidence that a combination of aggressive marketing and gradually returning confidence are bringing an end to the decline in underlying demand which afflicted the early part of this year,' commented JDPower's Pete Kelly.

Like American demand, European interest in cars has been damaged by weak economic conditions and subdued consumer sentiment.

However, there is now some hope that the industry may be able to recover, although expectations rest heavily on the continued strength of the Germany and Spanish markets.