UPDATE 2-Japan April power output falls deeper 8.5pct yr/yr

* Electricity output drops 8.5 pct yr/yr, steeper than March

* Nuclear utilisation slips ahead of TEPCO unit restart

* Data likely to add to uncertainty about economic recovery

* Oil burn falls to lowest since 2005, coal lowest since '04

* here (Updates with details throughout)

By Osamu Tsukimori

TOKYO, May 18 (Reuters) - Japanese electricity production by the nation's 10 utilities fell 8.5 percent in April versus last year, a slightly bigger fall than in March, likely adding to economic anxiety but helping cut fuel use to multi-year lows.

The utilities generated 68.96 billion kilowatt-hours of electricity in April, the Federation of Electric Power Companies of Japan said. It is the ninth consecutive decline as industrial output in the world's No. 2 economic slows sharply.

While the figure is an improvement from the record 15.8 percent year-on-year dive in power output in February, it is worse than the 7.2 percent fall registered in March, and officials have said they are not optimistic about the outlook.

Power demand has slumped as the Japanese economy falls into its worst recession since World War Two, with heavy industries such as steel mills and machinery sectors including automakers hit particularly hard. Data last month showing the first rise in industrial output in six months did little to assuage concerns.

The data also confirmed earlier government figures showing that the nuclear power plant utilisation rate at the 10 nuclear companies averaged 58.6 percent in April, up 9.5 percentage points from a year ago, although that's 1.2 percentage points lower compared to March, the data showed.

The higher nuclear output and sluggish power demand in face of economic depression have cut thermal power generation by 15.8 percent despite a 9.5 percent decline in hydro power output, reduding oil consumption to its lowest since May 2005 and even causing coal use to fall 13 percent to a five-year low.

For a graphic on the consumption of coal and LNG, click: here

The nuclear run rate at top utility Tokyo Electric Power (9501.T) was 33.3 percent in April, down from 33.5 percent a year earlier and 35.1 percent in March, but is expected to pick up as TEPCO gradually restarts its 1,356-megawatt No.7 reactor at the Kashiwazaki-Kariwa facility, the world's biggest plant.

LNG, COAL STOCKS RISE

The data also implied that Japanese utilities increased their inventories of liquefied natural gas (LNG) last month, buying 5.4 percent more than they consumed. Both purchases and use by the world's biggest LNG importer fell 2 percent from a year ago.

It also showed coal stocks increased marginally last month, after rising by 1.16 million tonnes in the past six months to March as utilities bought 4.7 percent more coal than they burned.

Power demand from large industrial customers fell a record 26.4 percent in February from a year ago, but it recovered slightly to a 24.4 percent decline in March. Data for April was not yet available.

Japan's economy probably shrank 4.2 percent in the first quarter, a Reuters poll of economists showed ahead of official data due out on Wednesday, putting it on track for its deepest quarterly contraction in modern history as the global slowdown crimps export demand and weighs on domestic consumption.

Following is a table of total energy consumption and purchases by the nation' 10 utilities for April, according to the federation data. For details on TEPCO alone see: [ID:nT35663]

Starting with April data, the federation said it would no longer publish data on each utility's detailed energy usage and generation in compliance with the antimonopoly law.

Volumes of crude and fuel oil are in kilolitres; LNG and coal are in tonnes. Year-on-year percentage changes in parentheses.

PURCHASES CONSUMPTION

Coal : 3,202,809 (-20%) 3,194,800 (-13%)

Fuel oil : 579,608 (-47%) 555,083 (-46%)

Crude oil: 146,832 (-84%) 134,290 (-84%)

LNG : 3,442,537 (-2%) 3,267,064 (-2%)

Naphtha : 0 0 (Editing by Jonathan Leff)