Europe: The best is yet to come?

The headlines are not kind: "German Manufacturing orders unexpectedly collapse"; "Euro zone PMI: Pace of overall September activity slower than first thought"; and the coup de grace, "European unemployment rate stays at 9.5%." The data coming into the final quarter of the year suggests the steady recovery in Europe is starting to slow.

This is all the more worrying given the European Central Bank's commitment to continue buying 60 billion euros ($67.3 billion) of bonds every month in a bid to stimulate economic activity. So what has gone wrong?

It's tempting to think that, perhaps like the fading glory of the Dowager Countess in the television series 'Downton Abbey', Europe's past is more splendid than its future. That the distant sonic boom of technological triumphs like Concorde and France's high speed TGV are nothing more than the death-rattle of a continent that is no longer globally competitive and has lived beyond its means for far too long.

Paris cafe with Eiffel Tower in background
Fred Derwal | Getty Images

As IMF Chief Christine Lagarde has recently pointed out, the euro area may struggle to find its swagger while it's still sitting on 900 billion euros of non-performing loans. However, away from trial-by-monthly-economic-data, there are reasons to be optimistic.

Swagger may be an overstatement of the facts, but the European Union is starting to strut a little.

Over the last 12 months the jobless rate has fallen in 22 European countries. The raw gross domestic product (GDP) data also points to an improvement. Second-quarter GDP increased in all 28 EU states except France where it stayed flat. And the consumer was a bright spot: household final consumption expenditure had a positive contribution to GDP growth in the euro area and the EU28.

Whisper it quietly, but Europe's long ignored emerging markets are also getting their mojo back. The Czech Republic, Croatia, Slovakia and the Baltic states are set for 2-3 percent growth this year. It has been a long road to recovery, but this is one part of the world that has been a net beneficiary of falling oil and commodity prices.

There is also good evidence of supply side economic improvement. European countries figured strongly in the top 25 in the recently released Global Innovation Index. Switzerland came first, followed by the U.K., Sweden and the Netherlands. Ireland was a notable performer, the small country devastated in the financial crisis of 2008, managed to leap from 11th place to eighth this year. In case you were wondering, the US came in fifth. Europe then clearly has world beating companies with world beating technology.

These companies are also rewarding investors with higher dividend pay-outs and better earnings. The second quarter of 2015 was the best quarter for five years. Fingers are crossed that the third quarter will also deliver in spite of the weaker macro outlook.

Analysts have pointed to the recovery in financial sector dividend payments as particularly encouraging.

Don't crack open the champagne just yet. The fug of smoky fumes from a maladjusted small engine diesel Volkswagen is set to obscure some of the better news. Europe is grappling with a refugee crisis, the German automotive sector is facing significant fines, and Greece is still a problem postponed rather than solved. But investors would be premature to write-off Europe.

Just like Downton's irrepressible Dowager Countess, Europe has an enduring ability to recover just as its obituary is being sent to the typesetters.