(Adds analyst comment on deflation, unemployment)
By Andrew Hay
MADRID, Nov 28 (Reuters) - Spain's inflation rate toppled 1.2 percentage points in November, preliminary data showed on Friday, pointing to an economy in rapid decline and strengthening the case for a big ECB rate cut next week.
Spain's EU-harmonised inflation fell to 2.4 percent from 3.6 percent in October to reach a 15-month low, the National Statistics Institute said. A Reuters poll had pointed to an increase in the consumer price index of 2.7 Percent.
It was the fourth month in a row of slowdown, led by a drop in fuel costs. Analysts said it was also spurred by a sharp fall in consumer spending as unemployment rises faster in Spain than any large European country.
The Spanish data followed a 1 percentage point drop in German consumer price growth and raised expectations euro zone inflation data out at 1000 GMT could fall below a Reuters forecast of 2.3 percent, down from 3.2 percent in October.
"Markets are braced for a very sharp drop in euro zone inflation, 2.3 or even lower, the economy is in freefall and inflation is also in freefall," said ING Senior Economist Martin Van Vliet.
Spain expects its inflation to fall below 1 percent by next July and most analysts see the European Central Bank cutting interest rates another 50 basis points at its Dec. 4 meeting.
BNP Paribas analyst Luigi Speranza saw a risk of negative euro zone inflation mid 2009.
Spanish Economy Minister Pedro Solbes says Spain has to avoid deflation --- prolonged negative inflation -- at all costs.
Crumbling household spending in Spain pushed the euro zone's fourth-largest economy into its first contraction in 15 years during the third quarter, forcing retailers to offer hefty discounts in the key shopping season ahead of Christmas.
Prospective house owners in Spain are waiting for property prices to fall further before buying and Spain could be vulnerable to deflation should consumers do the same on clothing and household goods, analysts said.
The fall in Spanish inflation is expected to steepen next year when house building all but grinds to a halt, sending up to a million more workers into the dole and pushing down wages, analysts said.
"Rising unemployment did not initially have a clear impact on inflation, but now are now close to 800,000 more people out of work, than a year earlier, this and oil prices, will have a clear impact," said economist Gilles Moec at Bank of America.
(Additional reporting by Manuel Maria Ruiz, Jonathan Gleave; Editing by John Stonestreet)