* German Oct car sales up 2.3 pct, driven by commercial demand
* French car sales gain 2.6 pct, delivery vans 3.7 pct
* In Spain government incentives boost sales
* However in Italy, sales fall due to weak economy (Adds Italian car sales)
PARIS, Nov 4 (Reuters) - Car sales in France, Spain and Germany picked up in October driven by a surge in demand for compact vehicles, signalling a cautious rebound spurred by an economic recovery in the euro zone.
The figures provided fresh evidence that the industry is recovering after European car sales slumped to their lowest six-months total in 20 years in the first half of 2013 as automakers suffered from the effects of record unemployment and government austerity measures in the euro zone.
New car registrations in Germany - the biggest EU auto market by sales - rose 2.3 percent, to 265,441 cars in October, compared with the same month last year.
France, the third-biggest EU market, advanced 2.6 percent to register 166,515 new cars, while new car sales in No.5 market Spain surged 34.3 percent to 60,301 cars, buoyed by a package of government incentives.
However in Italy, the fourth-biggest EU auto market, car sales continued their slump, falling 5.58 percent in October to 110,841 vehicles due to a weak economy and tight credit conditions.
Business surveys released on Monday showed factory production in the 17-nation euro zone accelerated in October, getting close to August’s 26-month high. Healthy growth in Germany, Europe’s biggest economy, pulled the troubled region out of its longest recession in the second quarter.
In Germany, compact cars accounted for 26.9 percent of new registrations, with Volkswagen up 1.9 percent and demand for Opel vehicles surging 12.1 percent, statistics from German industry association KBA show.
Of all the new cars sold in Germany last month, 62 percent were registered to companies, KBA said.
Volkswagen, Europe’s largest auto maker by sales, had the largest market share in Germany with 23.3 percent of new registrations.
“SIGNS OF RECOVERY”
French car sales rose for a second consecutive month in October, building on September’s 3.6 percent year-on-year gain, the CCFA industry association said in a statement.
Paris-based Peugeot PSA posted a 4.1 percent domestic sales gain helped by recent models such as the 308 compact and 2008 mini-SUV.
Renault sales rose 5.8 percent, boosted by its similarly sized Captur model while rival Volkswagen lost some ground with sales in France down 3.6 percent in October.
The CCFA raised its French market outlook, predicting a 6 percent decline for 2013 - smaller than the 8 percent contraction previously forecast.
“The market is picking up,” said Renault’s French sales chief Bernard Cambier, adding that the carmaker’s domestic order backlog was up 20 percent year-on-year.
“It’s clear that we have reached the bottom and there are already some signs of recovery,” Cambier said, citing a 3.7 percent gain in delivery van sales in October.
Car sales in Spain were boosted by a 2,000-euro rebate programme - 1,000 coming from the government and 1,000 from the manufacturer - for buyers of new cars who turn in a used car.
Peugeot’s Spanish group sales rose 52 percent, compared with 45 percent for Fiat and 28 percent for VW.
Hyundai and affiliate Kia continued to gain ground with combined sales increases of 5.8 percent in France and 47 percent in Spain last month. General Motors sales rose 9.4 percent and 31 percent in the respective markets.
In September, new car registrations in Europe climbed 5.5 percent to 1.19 million vehicles, only the third month a gain was recorded in the past two years, automotive industry association ACEA said last month. (Reporting by Laurence Frost and Benjamin Mallet in Paris, Edward Taylor in Frankfurt, and Jennifer Clark in Milan; Editing by Geert De Clercq and Pravin Char)