UPDATE 1-Mexico Dec gross fixed investment falls 0.3 pct

(Recasts; adds details on reading)

MEXICO CITY, March 11 (Reuters) - Mexico's gross fixed investment fell by a less than expected 0.3 percent in December from the year-ago period, the national statistics agency said on Wednesday.

Analysts had predicted the reading MXGFI=ECI, which is a measure of spending on machinery, equipment and construction, would decline by 2.65 percent according to the median estimate of a Reuters poll.

A drop in U.S. demand is hitting Mexican factories and causing an overall contraction in the country's economy.

Spending on equipment and machinery in December rose 8.8 percent, within which investment in domestically produced items dropped 0.6 percent.

Expenditures on imported equipment and machinery climbed 13.1 percent. A sharp drop in the value of the peso MXN= is down by over a third against the dollar since August, is making imports sharply more expensive in Mexico.

Construction investment declined 7 percent from a year earlier.

Gross fixed investment was down 3.21 percent in December compared with November, according to seasonally adjusted figures.

(Reporting by Jason Lange)