By Atul Prakash

LONDON (Reuters) - The blue-chip index ended 0.2 percent lower on Friday, as banking and insurance stocks fell on a gloomy economic outlook, outweighing gains in commodities and retail sector shares.

The commodity-heavy FTSE 100 .FTSE closed down 9.7 points at 5,352.6, after losing 1.6 percent on Thursday. The benchmark index ended the week with a decline of 0.4 percent -- the ninth negative weekly close in the past 10 weeks.

Banking stocks were the biggest sectoral loser, as investors remained concerned about more writedowns and the grim economic outlook.

"The FTSE will struggle to make progress in the short term. The first sector that needs to recover is the banking side, but the economic news generally is deteriorating," said Roger Cursley, UK strategist at Investec.

"Banks would continue to struggle. There remains question marks that the banking sector as a whole in the UK has raised enough additional capital."

Figures showed on Friday that Britain's economy grew at its weakest pace in three years in the second quarter of this year, while data in the previous session showed the pace of existing U.S. home sales tumbled to a 10-year low, reminding investors of the problems plaguing the world's largest economy.

But sales of newly constructed U.S. single-family homes were stronger than expected in June. New orders for long-lasting U.S. manufactured goods also rose unexpectedly in June.

Royal Bank of Scotland (RBS.L: Quote, Profile, Research), HSBC (HSBA.L: Quote, Profile, Research), Lloyds TSB (LLOY.L: Quote, Profile, Research) and Standard Chartered (STAN.L: Quote, Profile, Research) fell between 1.2 and 2.7 percent.