Euro zone industrial output jumped twice as much as expected in July, breaking a two-month trend of contraction and raising hopes that the single currency area may start growing again in the third quarter after stalling in the previous three months.

Industrial production in the 18 countries sharing the euro jumped by 1.0 per cent month-on-month in July, and was 2.2 per cent higher on the year, well above expectations.

The annual expansion showed the strongest rise since November last year when production increased 2.7 per cent, European Union's statistics office Eurostat said.

Eurostat said the monthly rise was driven mainly by the production of capital goods which rose 2.6 per cent in July, followed by 1.2 per cent growth in the production of non-durable consumer goods.

A country-by-country breakdown of the figures showed Ireland saw the biggest monthly rise, recording an 11.3 per cent jump in output in July on the back a surge in pharmaceutical exports.

Europe's growth engine Germany saw industrial production expanding at its fastest pace in eight months, up 1.9 per cent month-on-month, matching a rise seen in November last year.

Italy was the only major euro zone country that saw its output fall as production contracted 1.0 per cent on the month.

The euro zone's second largest economy France reported a deceleration in industrial output growth to 0.2 per cent on the month from a 1.3 per cent rise in June.

Analysts said the Italian data was worrying because it could signal that the country would remain in recession in the third quarter as well.

"It's disappointing and judging from the sentiment indicators we have had for August it means in all likelihood industrial output will fall in the third quarter, which means GDP risks contracting again as well," said Riccardo Barbieri, chief European economist at Mizuho.

Both Rome and Paris struggle to fix their public finances.

France said on Wednesday it would not honour commitments to bring its budget deficit below the European Union ceiling of 3 per cent of GDP next year as promised.

In a separate data release, Eurostat said that employment in the euro zone rose 0.2 per cent on the quarter in the three months to June after growing 0.1 per cent in the previous two quarters.