* European (EU27+EFTA) market up 4.8 pct y/y at 1.02 mln cars
* European market drops 5.2 pct to 7.46 mln cars in Jan-July
* German carmakers confident demand will stabilise in H2
FRANKFURT, Aug 16 (Reuters) - Europe's ailing car market grew in annual terms for only the second time this year in July, supporting hopes of a much-needed stabilisation in the second half of 2013.
Registrations of new cars in Europe rose 4.8 percent compared to the same month a year ago to 1.02 million vehicles, according to data published on Friday by the German auto industry association VDA.
"The positive July result ... is a good start for the stabilisation we expect in the second half," VDA President Matthias Wissmann said in a statement.
"The emerging economic recovery in western Europe appears to be reflected in the development of car demand," he continued, adding that double-digit gains in austerity-hit Spain, Portugal and Greece were cause for confidence.
An extra working day in Germany, the region's economic engine of growth, helped lift domestic sales slightly in July over the previous year's month, but Frankfurt-based market researcher Dataforce calculates that volumes there still shrank 2.3 percent when adjusted for this calendar effect.
Europe's car market is set to shrink for a fourth straight year, plumbing depths not seen in 20 years but second quarter results have suggested some mas-market producer are closer to breaking even in Europe than previously thought.
Registrations in the first seven months of the year fell 5.2 percent to 7.46 million vehicles, but demand is expected to cease dropping materially as sales rates have started to recover and year-on-year comparisons become easier given the second half of 2012 was weak.
A senior Ford executive told Reuters earlier this week that a manufacturers' price war would not let up until sales increase significantly.