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* Factory exports drop 7.9 percent in January vs December
* Imports rise 4 percent, tilting trade balance to deficit
MEXICO CITY, Feb 26 (Reuters) - Mexican manufactured exports slumped in January by the most in just over four years, hurt by a weaker U.S. appetite for local goods, but solid consumer imports pointed to steady domestic demand.
Manufactured exports fell 7.9 percent last month from December, the national statistics agency INEGI said on Tuesday. In was the biggest month-on-month drop since December 2008, when the country was sinking into a deep recession.
U.S. demand for Mexican-made exports, such as cars and TVs, helped bolster Latin America's second-biggest economy last year amid sluggish global growth, but Mexican growth is seen slowing to a 3.5 percent rate this year from 3.9 percent in 2012.
"We are seeing a big deceleration in the manufacturing sector at the start of the year," said Alejandro Cervantes, an analyst at brokerage Banorte-IXE in Mexico City. "Internal demand is going to be the main engine of growth this year."
Total imports rose 3.98 percent in January compared with December, while imports of non-oil consumer goods rose 6.74 percent versus the prior month.
Mexico's central bank said in January it could lower its benchmark interest rate from 4.50 percent if inflation continues to cool and growth slows.
Since then, data showed that industrial production fell in December by the most since 2009 while retail sales that month fell by the most in over a decade.
If U.S. lawmakers fail to strike a budget deal, sharp spending cuts are set to take effect on Friday that could drag on U.S. economic growth and sap demand for Mexican exports.
Yields on Mexican interest rate swaps were little changed after the data, with investors sticking to bets of nearly even odds on a 25 basis point cut in March.
Mexico posted a $2.192 billion trade deficit in January, when adjusted for seasonal swings, due to a surge in non-oil imports and lower oil exports compared with December. It was the country's biggest deficit since late 2008.
In non-seasonally adjusted terms, Mexico posted a trade deficit of $2.879 billion.
Increased competitiveness of Mexican goods helped the country post its first annual trade surplus in 15 years in 2012.