Greek consumer prices continue to fall

Greece stayed in deflation territory for the fifth month in a row in July as consumer prices fell 0.7 percent on an annual basis after a drop of 0.4 percent in June, statistics service data showed on Tuesday.

July’s inflation reading was below a forecast of -0.4 percent. EU-harmonised deflation accelerated to -0.5 percent from -0.3 percent in the previous month.

A deep recession, wage cuts and ample spare capacity combine to exert downward pressure on prices, setting in motion an internal devaluation process that could render the country’s economy more competitive.

But Greece’s EU/IMF lenders said that prices should drop faster and have attributed their relatively slow pace of decline to inadequate product market reforms.

Price dynamics are expected to keep Greece’s inflation rate below the eurozone’s average in the medium term, according to the International Monetary Fund. Inflation in the 17 countries sharing the euro was stable at 1.6 percent in July.