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UPDATE 1-Thai factory output falls 6.4 pct y/y in Jan

(Adds details, comment)

* Factory output -6.4 y/y in Jan vs revised -6.3 pct in Dec

* Reuters poll had forecast 7.4 pct fall in Jan output

* Annual output down a 10th straight month; exports still weak

* Political unrest affects growth prospects, consumption, investment

BANGKOK, Feb 28 (Reuters) - Thai factory output declined slightly less than expected in January, but the 10th consecutive month of reduced activity is the latest indicator of declining domestic demand during the country's protracted political crisis.

Industrial output dropped 6.41 percent in January from a year earlier. That was smaller than the median of an annual 7.40 percent in a Reuters poll and compared with a revised 6.30 percent fall in December.

Data from the Bank of Thailand on private consumption and investment for January is due later on Friday.

Overall, output dropped 3.18 percent in 2013. The Industry Ministry has forecast a 1.5-2.5 percent rise this year.

No details on January performance of key industries such as autos and computer disk-drives were immediately available.

January capacity utilization was 61.76 percent, compared with a revised 59.9 percent for December, according to the ministry. Average utilization for 2013 was 64.4 percent.

In Thailand, production generally tracks exports, which account for more than 60 percent of gross domestic product.

The pivotal auto sector has slowed since the middle of last year following the expiration of a government subsidy scheme for car purchases.

Exports have been weak. Customs trade data this week showed exports unexpectedly fell about 2 percent in January from a year earlier while imports tumbled 15.5 percent.

Although political unrest has not disrupted factories or ports, it has hurt confidence, consumption and delayed investment plans, particularly large public works. Violence has caused some tourists to cancel Bangkok trips.

"The political situation and weak economy should affect steel demand in the construction sector because the government's 2 trillion baht ($61 billion) infrastructure projects have been delayed," said Rajiv Mangal, president and CEO at Tata Steel (Thailand) Plc, a unit of India's biggest steelmaker.

PRESSURE ON CENTRAL BANK

A general election was held on Feb. 2 but was disrupted by anti-government protesters trying to remove Prime Minister Yingluck Shinawatra. Her caretaker administration has limited powers to borrow.

Economists say poor data and the lingering political crisis are putting pressure on the Bank of Thailand to cut interest rates.

The central bank's monetary policy committee (MPC) unexpectedly kept its policy rate unchanged at 2.25 percent on Jan. 22, saying the unrest should be a short-term risk. But the vote was 4-3, with three members supporting a cut.

The next policy meeting is March 12.

($1 = 32.6 baht)

(Additional reporting by Pisit Changplayngam; Editing by Richard Borsuk)