* CPI falls more than expected to 47-yr low
* Prices pushed down by fall in rental costs
* Disinflation to deepen before yr-end rebound
(Adds details, analyst, retailer comment)
By Andrew Hay
MADRID, May 13 (Reuters) - Spain's consumer price index fell more than expected in April to a 47-year low, and weaker energy costs and recession are seen driving further disinflation before a year-end rebound.
Year-on-year prices fell 0.2 percent in April, compared with a 0.1 percent dip in March, to reach the index's lowest rate since records began in 1962, data from Spain's National Statistics Institute showed on Wednesday.
That was further into negative territory than an official flash estimate and a Reuters forecast for a 0.1 percent slide.
"We expect the fall to deepen in the summer months to a negative rate of 1.2 percent -- (but) by the end of the year we see a practically flat rate," said Citi strategist Jose Luis Martinez.
Spain was the first country in the 16-member euro zone to experience negative inflation when its CPI index fell in March on the statistical impact of high year-ago oil prices and discounting by recession-hit retailers.
"People are not buying so we've cut prices a bit, in line with what wholesalers are doing," Madrid greengrocer Santiago Gil told Reuters on Wednesday.
RENTS DOWN
Spanish consumer prices have long risen faster than those in other euro zone countries due to an inefficient service sector.
The Bank of Spain says it will be a blessing if the country can cut costs, and boost low competitiveness, without sliding into deflation.
A housing collapse and the global crisis has sent Spanish unemployment to the highest rate in the bloc at 17.4 percent and the European Commission expects Spain to be the last European Union member to exit recession, probably in 2011.
A price war has started among Spanish clothing chains, spurring the second largest retail sale fall on record in March as unemployment and a house price slide kept shoppers at home.
April consumer prices were also pushed down by a hefty 1.4 percent fall in housing costs as rents fell, INE said.
Rents in Spain are indexed to inflation and analysts saw them falling as they were revised in line with consumer prices that have fallen 4.4 percentage points since April of 2008.
The Spanish results contrasted with a slight pick up in German inflation after it hit a 10-year low in March.
The Bank of Spain rules out a deflationary spiral as fuel prices pick up later in the year.
Spanish core inflation -- which discounts volatile energy and fresh food components -- held steady in April at 1.3 percent in what analysts saw as a further argument against deflation.
(Reporting by Andrew Hay and Robert Hetz; Editing by Patrick Graham)