(Adds background, Spanish government comment)
By Andrew Hay
MADRID, Jan 30 (Reuters) - Spanish inflation dropped far faster than expected in January, hitting a record low and raising expectations that wider euro zone consumer price data will be below forecasts.
Spanish EU-harmonised annual inflation fell to 0.8 percent year-on-year in January, its lowest level in records stretching back a decade, and well below a forecast of 1.2 percent, a Statistics Institute preliminary estimate showed on Friday.
The Spanish data follows lower-than-expected German inflation and precedes the wider euro zone number at 1000 GMT, which analysts forecast will fall to 1.4 percent from 1.6 percent, according to a Reuters poll.
"The risk is the (euro zone) consensus figure of 1.4 percent is too high, the odds of 1.3 percent are rising," said Martin Van Vliet at ING. "There is a significant chance of a lower than expected number, even 1.2 percent, but that's unlikely."
Spanish harmonised inflation had come in at 1.5 percent in December. Final Spanish inflation data is due out on Feb. 13.
Dominic Bryant at BNP Paribas did not rule out a euro zone level below 1.2 percent after the Spanish number. He also pointed out that Spanish inflation has higher components for energy and food, both of which sectors have been easing in price, than elsewhere.
"When it comes to energy prices, the (feed through) is different in different countries, that could be behind it." he said, referring to the sharp fall in inflation.
"It's indicative of a more general downward shock to prices and the consensus could be surprised and even we could be surprised," said Bryant, who forecasts 1.2 percent January inflation for the euro zone.
Spain's Economy Secretary David Vegara said inflation would continue to fall in the first half of this year but would not turn into deflation.
Asked about whether falling inflation would make it more likely that the European Central Bank would cut rates at its meeting next week, he replied: "We are convinced the ECB will take all available data into consideration and act accordingly."
Most analysts expect the ECB to cut rates to 1.5 percent in March from a current 2 percent, given its outlook for euro zone inflation to end the year at its target level of just below 2 percent, a Reuters poll showed.
(Additional reporting by Robert Hetz, Manuel Maria Ruiz and Ben Harding; Editing by Patrick Graham)