BERLIN (Reuters) - - German industry output dropped by a more-than-expected 1.7 percent on the month in July, data showed on Friday, but a two-month average suggested that industry in Europe's largest economy is on the path to recovery. Output decreased even more than the lowest estimate of -1.3 percent in Reuters poll of 34 economists. The consensus forecast was for a slide of 0.5 percent. But a two-month average showed a gradual rise in output at 0.5 percent, data from the Economy Ministry showed. "The current decline in production is due not least to a strong result from the prior month," the ministry said. In June, output jumped by 2.0 percent, revised downward from 2.4, driven by a high number of public holidays and workers taking "bridge days" off around them. "The weak phase is over... Overall, the upward trend appears to be continuing moderately in manufacturing and significantly stronger in construction." (Reporting by Sophie Duvernoy)