Economic sentiment reached a 15-month high in the eurozone in July, strengthening hopes that a firm recovery is finally underway. However, joblessness remains at an all time high, and tough austerity measures are still holding back growth.

According to survey carried out by the European Commission, economic sentiment has been on the rise for three months. The results of the survey have fueled hopes that the region will leave the three-year recession behind before the end of this year.

The Spanish economy continued to contract in the quarter between April and June, reporting a 0.1 percent decline. However the rate of contraction seems to finally be slowing, compared to the previous quarter when the Spanish economy shrank by 0.5 percent.

The EC survey, which is conducted monthly, confirmed that the economic index in the region had risen to 92.5 points in July, the highest since April 2012. However, market expectation had been slightly higher. The single low point of the report was in the construction in the construction sector, where consumer confidence actually declined.

Confidence has improved in all of the eurozone’s five largest economies, apart from the Netherlands, where there was a significant drop. In France, the index was up by as much as 1.2 points. However, these figures are still below long-term norms. “This suggests that businesses will remain cautious in their employment and investment plans in the near term at least,” says Howard Archer, chief European & UK economist and senior director at IHS. “Similarly, it is hard to see consumers generally lifting their spending markedly in the near term as their confidence is still limited despite improving appreciably to a 23-month high in July while they are still facing generally high unemployment and limited purchasing power.”

Experts are hoping a rise in consumer confidence will help boost spending, which would in turn help support faster growth. Meanwhile, the survey suggested enduringly low inflationary pressures. Consumers’ inflation expectations dropped and remain well under long-term standards.

“We think it is very possible that the ECB will eventually take its key policy [interest] rate down from 0.5 percent to 0.25 percent as we anticipate that the Eurozone will continue to find it very tough to develop clear growth despite the improved July surveys,” explains Archer. “An eventual cutting of interest rates by the ECB would also likely ram home the message that any tightening of monetary policy is a long way off and could help to keep bond yields down.”