* Staffing, industrial, auto firms among those eyeing upturn
* U.S. companies also eye improvement
* Not all positive, some profit warnings hurt shares
By Victoria Bryan
FRANKFURT, Oct 27 (Reuters) - Down in the undergrowth ofEurope's economy, something is stirring.
Whether they make paper to pack peaches, recruit temps forsecretarial work or work at the dirty end, handling the wastethat all businesses produce, managers are talking about signsthe gloom is lifting and hopes that growth is on its way back.
The euro zone came out of a long recession in the secondquarter and a survey last week of purchasing managers - a guideto how firms see their business growing in the coming months -seemed to confirm recovery, albeit tentatively, is taking root.
"There is certainly growing optimism that things are on themend in Europe," said Vasant Prabhu, chief financial officer ofStarwood Hotel and Resorts Worldwide, one of a host ofexecutives to comment during the third-quarter earnings season.
The company, which runs Sheraton and other hotel brands,said it did well from tourists in Italy and Spain and made morerevenue from each room thanks to a lack of new hotels opening.
Among multinationals whose job it is to fill the jobs thatcompanies start to create as they expand, there is a similarsense of being at the leading edge of an upturn in fortunes:
"The positive signals that emerged during the previousquarter persisted in the third quarter," said Rob Zandbergen,chief executive of USG People, echoing comments fromrival Manpower.
The staffing sector is seen as an economic barometer asfirms tend to hire temporary staff first, waiting for furtherevidence of recovery before adding to their permanent payroll.
Zandbergen said companies dealing with logistics and makingsemi-finished goods - typically involved in the early stages ofproduction before products reach their final buyers - were doingwell: "A number of early-cyclical sectors returned to revenuegrowth in the third quarter," he said.
Another business close to the inner workings of industry,French waste and water company Suez Environnement,said the upswing had yet to arrive - but that at least thingsseemed to have flattened out after a period of decline.
"We are not seeing a recovery of industrial activity, but weare entering a phase of stabilisation," said Jean-Marc Boursier,finance chief for Suez, which sees a close correlation betweenindustrial production and the volumes of waste it handles.
Companies that supply the construction sector, like France'sSaint-Gobain and Britain's Travis Perkins,also appear to be early beneficiaries as housebuilding picks up.
Saint-Gobain, Europe's biggest supplier of buildingmaterials, which makes materials used in roofing and insulationas well as glass for windows and vehicle windshields, saidmarket conditions were gradually stabilising in Europe and itexpected a continuing rally in Britain and Germany.
Car makers said they finally saw some cause for hope afterEuropean car registrations steadied after seven quarters ofdecline - though their market remains difficult.
Ford Chief Financial Officer Bob Shanks said overallauto sales in Europe may see "very, very modest growth".
"The environment in Europe as well as industry sales mayhave turned a corner," he said. "We are feeling much morepositive about that than where we have been the last year, yearand a half."
Daimler Chief Financial Officer Bodo Uebberechoed that but cautioned: "Western Europe remains at a very lowlevel and continues to be highly competitive."
Across the Atlantic, American companies are showingincreasingly nuanced views on Europe, a far cry from the near panicked run for the exits of late 2011.
International Paper Co, for example, reportedbetter-than-expected earnings, helped in part by a surprisingimprovement in European sales of industrial packaging. A betterthan expected harvest resulted in greater demand for boxes for avocados, peaches and other fruit and vegetables.
"The eurozone economy has hit the bottom," IP CEO JohnFaraci told Reuters in an interview. "As we look at our businessthere, the volume declines have stopped."
Dow Chemical, which has trimmed capacity in Europeand reported a 6-percent drop in quarterly sales volume, wasnonetheless one of several companies offering guarded optimismabout the next few quarters.
Rival DuPont also spoke of improvement anddiversified manufacturer 3M reported its strongestquarter in Europe since the first three months of 2011.
"Conditions in Europe remain soft," said Dow Chief ExecutiveAndrew Liveris. "However, in our view the market has foundbottom and we expect to see more positive signals in the nearterm than in the previous three years, especially in thenorthern zone countries."
Translating early signs of future growth into profits willtake time, however, not least for European companies who haveseen a strong euro crimp the value of their overseas earnings.
A string of profit warnings hit European shares last weekand an unexpected fall in the German Ifo business climate indexon Friday cast doubt on the strength of the recovery.
According to Thomson Reuters StarMine data, 27 percent ofthe companies on the STOXX Europe 600 have announcedrecent results, of which 43 percent did not meet expectations.
Among them was French electrical gear maker SchneiderElectric. CFO Emmanuel Babeau told Reuters: "ClearlyEurope has remained extremely tough."
- Europe News