Euro area industrial production increased more than economists forecast in July, as increasing output in Germany helped offset decreases in countries from Spain to the Netherlands.

Output in the 17-nation euro area advanced 0.6 per cent from June, when it fell 0.6 per cent, the European Union's statistics office in Luxembourg said today.

From a year ago, production fell 2.3 per cent.

European manufacturers are seeking ways to lower costs as the euro region's deepening economic slump, faltering global growth and budget cuts from Spain to Italy erode export and consumer demand.

Euro-area manufacturing contracted more than initially estimated in August and economic confidence fell to a three-year low as governments struggled to contain the turmoil.

"We're limping into the second half of the year," George Magnus, a senior economic adviser at UBS AG in London said.

"We're not in a global recession, but it's going to be a close- run thing in 2013."

Euro-area output of capital goods led gains, rising 2.4 per cent in July from the previous month, when it fell 1.2 per cent, today's report showed.

Production of durable consumer goods fell 0.5 per cent, while output of intermediate goods rose 0.1 per cent. Energy production slipped 1.2 per cent.

Europe's economy may struggle to gather strength after shrinking 0.2 percent in the second quarter, with at least five nations including Italy and Spain in recession.

In Germany, Europe's largest economy, business confidence fell for a fourth month in August and investors also grew more pessimistic.

The Organization for Economic Cooperation and Development said on September 6 that Europe's fiscal crisis is hurting growth across Group of Seven economies, calling it the "most important risk" for the global economy.

It also cut its 2012 economic forecasts for the largest euro-area economies including Germany.

Bloomberg