By Brian Rohan
PARIS, Jan 2 (Reuters) - French manufacturing activity contracted at its fastest pace in over 10 years in December as thinning order books weakened the sector, a survey showed on Friday.
Final data from the Markit/CDAF purchasing managers' index (PMI) for manufacturing -- which covers everything from makers of cars to designer luggage -- showed its headline indicator falling to 34.9 in December from 37.3 the previous month.
The figure was the lowest since the survey began in April 1998 and a full point below a flash estimate published last month and the average forecast from economists polled by Reuters, both of which were 35.9.
In the PMI survey, a reading above 50 denotes expansion, and below 50 means contraction.
"The French manufacturing sector ended the year in tailspin as demand continued to rapidly contract," said Jack Kennedy, economist at data compiler Markit.
A subcomponent tracking new orders fell to a record low of 28.2 from 32.7 the previous month, pointing to tougher times ahead for a sector that makes up around a quarter of the French economy, the second largest in the euro zone.
National statistics office INSEE said last month it expected the French economy to contract 0.8 percent in the last three months of 2008, and stay in negative territory for two more quarters.
President Nicolas Sarkozy announced a 26 billion euro ($36.4 billion) stimulus package last month that his government says will add a percentage point of growth to the economy.
But economists worry whether the plan, which focuses on investment, will help to boost the economy quickly enough to stave off recession and help troubled sectors like the automotive industry, which has announced thousands of job cuts.
Sarkozy warned last month in a debate at the European Parliament that Europe risked becoming an "industrial wasteland" if it didn't intervene more to prop up manufacturers, adding that France was considering a special loan programme to encourage consumers to buy environmentally friendly cars.
(Editing by Tony Austin)