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UPDATE 1-Lower fuel bills drag down French consumer spending

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PARIS, Nov 28 (Reuters) - French consumer spending unexpectedly fell in October, heaping further bad news on the euro zone's second-largest economy after unemployment hit a fresh record high.

Spending shrunk 0.9 percent in October after a 0.5 percent contraction in September, confounding expectations of a small rebound as households did not turn heaters on because of warmer-than-usual temperatures.

A separate set of data by the INSEE official statistics office showed that producer prices fell by 0.2 percent month-on-month, also in October, adding to evidence that inflation pressures are largely absent.

A Reuters poll of 11 economists had forecast on average that spending rose by 0.3 percent in October.

Consumer spending has been volatile for the past few months, with rebounds often alternating with contractions as consumers fail to play their traditional role as the motor of growth in the stagnant French economy.

Spending on energy fell to its lowest level since 1997, while spending on manufactured goods was largely stable.

The jobless increase in October was the biggest monthly rise since February, data showed on Thursday, with 3,460,900 now unemployed in mainland France, a major drag on the already record-low popularity of President Francois Hollande.

Industry and consumer sentiment surveys have this week shown a slight improvement of morale in November.

For full details and data from INSEE: http://www.insee.fr/en/themes/info-rapide.asp?id=19

For consumer spending and morale graphic: http://link.reuters.com/pef35s (Reporting by Ingrid Melander; Additional reporting by Yann Le Guernigou; editing by Mark John)