(Adds Michigan's reaction)

By Lisa Lambert

WASHINGTON, July 10 (Reuters) - Citing concerns about the "significant deterioration" of Michigan's economy, Fitch Ratings downgraded the state's general obligation ratings on Friday by one notch to A-plus, the fifth-highest investment grade level, from AA-minus.

Fitch said it lowered the ratings because of high unemployment levels in the U.S. automotive manufacturing sector, which is largely concentrated in Michigan.

"Fitch believes the automotive sector will continue to be under stress due to the financial crises and global economic recession," it said in a statement.

The rating agency, however, revised Michigan's ratings outlook to stable from negative, saying the Midwestern state has a history of promptly addressing budget problems during recessions and it expects "the state will take appropriate actions" if its revenue continues to drop.

"We're somewhat surprised," said Michigan Treasury Department spokesman Terry Stanton, noting that the other two major rating agencies, Standard & Poor's and Moody's Investor Services, recently reaffirmed their ratings for the state.

"From our standpoint, our revenue, economic and employment projections for the remainder of the current fiscal year and for fiscal year 2010 took the bankruptcies and the contract in Michigan's auto industry into account," he added.

For 25 out of the 26 past months, Michigan has had the highest unemployment rate of the 50 U.S. states, according to Labor Department statistics, as two of the three dominant car makers in the United States floundered and ultimately filed for bankruptcy.