* French car sales down 11 pct at 85,565 in August
* CCFA industry body maintains 2013 forecast
* Spanish sales down 18.3 percent at 38,872
* Italy sales down 6.56 percent
* GM, Fiat, Renault gains buck decline
PARIS/MADRID, Sept 2 (Reuters) - French, Italian and Spanish auto registrations dropped sharply last month, dimming prospects for a stabilisation in demand which has been hammered by economic downturn.
In France, registrations fell 11 percent to 85,565 vehicles in August, a slow holiday month from which it is hard to extrapolate trends, France's CCFA industry group said on Monday.
The decline was led by falling sales for mass-market brands Volkswagen, Ford and Peugeot.
Sales for the first eight months of the year were down 10 percent and the Paris-based organisation maintained its full-year forecast of an 8 percent decline.
"September and October will be critical," CCFA spokesman Francois Roudier said. "August is always a thin month, but this year it's particularly low."
In Italy, Europe's fourth-largest market, car sales fell 6.56 percent in August to 52,997 from a year ago, the Transport Ministry said, bringing the drop so far this year to 9.2 percent.
Car dealers' association Federauto said August's poor performance was a sign Italy's economy was not yet showing signs of recovery.
In Spain, sales dropped 18.3 percent year-on-year after rising by almost 15 percent in July, car manufacturers' association Anfac said.
August's figures were affected by a jump in sales in the same month last year, ahead of a 3 percentage point rise in value-added tax in September and due to calendar effects, Anfac said.
Some 38,872 cars were sold in August and the association said a Spanish government subsidy scheme for the purchase of new vehicles would mean a probable rise in September.
"Projections suggest the full year will close with about 700,000 sales, close to last year's figure," Spanish dealer association president Juan Antonio Sanchez Torres said.
European car industry leaders will update investors on their outlook for regional demand when they gather in Germany next week for the Frankfurt auto show, which opens on Sept. 10 for a media preview and to the public two days later.
The monthly sales figures showed Europe's No.1 carmaker Volkswagen led the decline in France with a 24 percent plunge, mainly attributable to weaker sales at its namesake brand.
Ford and PSA Peugeot Citroen were among other mass automakers that fared poorly in France, with respective declines of 19 percent and 17 percent.
But General Motors' 16 percent sales gain defied the slump thanks to the Chevrolet brand, which recorded 2,429 car sales, up 64 percent. Fiat deliveries also gained 9.9 percent and Renault achieved a 1.7 percent rise.
Combined with its Alfa Romeo and Lancia divisions, Fiat advanced 19 percent in Spain and 9.9 percent in France.
Renault, helped by its new Clio subcompact, gained between 1 and 2 percent in both countries and also benefited from Spanish demand for its low-cost Dacia brand.
"We're in line with our market forecasts," Renault sales chief Bernard Cambier said in an interview. Excluding calendar effects, he said, August registrations suggested the French market remained on track for an 8 percent decline this year.
Daimler's Mercedes-Benz division recorded just 1,927 French August car registrations, down 37 percent year-on-year, reflecting a French sales ban imposed on several Mercedes models in a dispute over air-conditioning refrigerants, lifted by a court injunction last week.