UPDATE 2-Final French Q4 figures add to gloomy outlook

(Adds Safran sale, analyst quote)

PARIS, March 27 (Reuters) - Falling investment and weak household spending were at the heart of a contraction in France's economy at the end of last year, offering little hope it will bounce back quickly to the growth it needs to cure its financial problems.

Growth in the 2-trillion euro economy has been hovering around zero since mid-2011 and is forecast to be flat again in 2013, undermining the government's efforts to reduce spiralling unemployment.

Data from statistics agency INSEE on Wednesday confirmed the economy shrank 0.3 percent in the fourth quarter of 2012, and showed the euro zone's second-biggest economy stagnated overall last year. Its only growth was an upwardly revised 0.2 percent expansion in the third quarter.

Household purchasing power contracted by 0.4 percent over the year as a whole, the first time it has shrunk since 1984. Corporate profit margins, which are among the lowest in Europe, stood at 27.9 percent in 2012, the weakest since 1985.

"The fall in purchasing power is to do with a rise in fiscal and social deductions at the end of the year. We should see some respite on that front in the first half of 2013," said Credit Agricole economist Axelle Lacan.

He said that the bank saw evidence that households were more ready to dip into their savings in the months ahead to fund spending, however, potentially propping up domestic demand to some extent this year.

The French government, which admitted earlier this year it will fall well short of its 2013 growth and deficit targets, said on Wednesday it would raise 448.5 million euros from the sale of a 3.12 percent stake in aerospace group Safran .

The proceeds are to be used to fund investments to bolster the stalled economy as President Francois Hollande battles to fulfill an election promise to restore the ailing industrial sector to health.

The European Commission has forecast that France's economy will grow by a mere 0.1 percent in 2013, with rampant unemployment weighing on household spending.

Wednesday's data piles further gloom on France's economic outlook after data showed on Tuesday that the number of people out of work climbed towards a record high in February, with the rise taking an increasingly heavy toll on consumer morale.

(Reporting by Ingrid Melander)

(([e-mail])([phone])(Reuters

Messaging: [e-mail]))

Keywords: FRANCE ECONOMY/GDP