Official figures show that consumer prices in the euro zone fell at a record annual rate of 0.7% in July, having dropped for the first time the previous month. The fall was bigger than EU agency Eurostat's initial estimate of 0.6%.
The inflation rate was -0.1% in June, the first time that euro zone prices had dipped since the zone was formed in 1999. Under the EU's measure of inflation, Ireland's annual fall in July was the biggest at 2.6%.
After hitting a record high of 4% in June and July 2008, euro zone inflation has fallen sharply as oil and other commodity prices have collapsed in the face of the global economic downturn.
Most economists have expected that euro zone inflation would dip briefly into negative territory but they have ruled out a longer Japanese-like bout of deflation, a pernicious downward spiral in prices.
While the prospect of falling prices may delight consumers it can wreak havoc on the broader economy as households put off purchases hoping for future bargains.
