Official figures show that US consumer prices fell by a slightly smaller than expected margin in December.
The annual rate of inflation in December was the slowest in more than 50 years at 0.1%.
The Labor Department said its closely watched Consumer Price Index dropped 0.7% in the month after falling by 1.7% in November - tumbling for a third straight month. Analysts had expected a drop of around 0.9%.
Core prices, which exclude food and energy items, were flat for the second month in a row in December.
Energy prices fell 8.3% in December, after declining 17% in November. Compared with the same period last year, energy prices fell a record 21.3%.
Separate figures from the Federal Reserve showed that US industrial production dropped 2% last month, capping a dismal year for manufacturing as the recession took hold. For the fourth quarter, industrial output fell at an 11.5% annual rate. Compared with December 2007, industrial production was down 7.8%, the biggest 12-month drop since September 1975.
