(Adds background, details, economist quotes)
By James Mackenzie
PARIS, Feb 10 (Reuters) - French industry output fell 1.8 percent month-on-month in December, according to data on Tuesday that was slightly less drastic than forecast but enough to point to recession in the euro zone's second biggest economy.
National statistics office INSEE said the December decline followed a 2.8 percent fall in November which was revised from an originally reported 2.4 percent.
Economists polled by Reuters had forecast a 1.9 percent decline in December and the French data wasn't as bad as elsewhere in Europe, but few people drew much comfort from the report.
"We expected it to be bad and it is. It doesn't augur very well for the GDP figures at the end of the week," said Bruno Cavalier, an economist at private bankers Oddo et Cie in Paris.
France has so far narrowly avoided recession, usually defined as two successive quarters of negative growth, but economists are expecting a 1.1 percent decline in the fourth quarter figures due on Friday with little improvement in sight.
"At this stage, I don't know whether you can say that the first quarter will be any better than the fourth quarter," Cavalier said. "I think they are going to be pretty much as bad as each other."
Tuesday's data, which indicated an 11.1 percent decline in production over the year, showed intermediate goods output down 7.6 percent and the crisis-hit automobile sector continuing its downwards spiral with a 7.7 percent monthly decline.
That brought automobile output in the last quarter of the year down 38.7 percent from the same period a year earlier, underlining the acute problems that have hit a sector that accounts for one in 10 French jobs.
"It's a lot about autos and that's a situation that should remain fairly fragile or even bad over the course of the first quarter and will then doubtlessly stabilise at a very low level in the second quarter," said Olivier Bizimana, an economist at Credit Agricole in Paris.
There were some bright spots, with capital equipment production up 2.6 percent, helped by a relatively buoyant aircraft and shipbuilding sector. Food and agriculture output was up 1.6 percent.
Consumer goods output was also slightly positive, rising 0.2 percent.
The monthly fall was also relatively mild compared with the record 4.6 percent drop seen in German industry output last week or the 5.1 percent decline reported in Swedish industrial production on Tuesday.
"Industry has been contracting for three quarters and I think it's more than a recession, it's a depression that our industry is experiencing," said Marc Touati, an economist with Global Equities in Paris.
"However I do think we're currently hitting the bottom. Things may still get a little worse but by and large I think the haemorrhage has been stopped," he said. (Additional reporting by Estelle Shirbon, Crispian Balmer, Sophie Hardach and Veronique Tison) (Reporting by James Mackenzie, editing by David Stamp)