The economy remains far from recovery, with consumer prices falling for a seventh straight month in July due mainly to prolonged weak consumption.
The Commerce Ministry reported Monday that consumer prices based on 450 products and services contracted by 1.05% year-on-year last month.
That followed contractions of 1.07% in June, 1.27% in May, 1.04% in April, 0.57% in March, 0.52% in February and 0.41% in January.
Somkiat Triratpan, director of the ministry's Office of Trade Policy and Strategy, attributed the fall mainly to low energy prices and overall weak purchasing power in light of battered consumer confidence on poor economic prospects and the drought.
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On a month-on-month basis, headline inflation fell by 0.07% from June, with non-food items and beverages falling by 0.34%. Food prices rose by 0.41%, mainly for fresh vegetables as dry, hot weather hurt output.
For the first seven months, headline inflation fell by 0.85% from a year earlier due largely to a decline in non-food items and beverages, which dropped by 1.88%.
Prices of food and non-alcoholic drinks, however, increased by 1.09%, led largely by seasonings, prepared food, fruit and vegetables.
Core inflation, which excludes volatile oil and food prices, managed to edge up last month by 0.94% year-on-year and 0.1% month-on-month.
In the first seven months, core inflation rose by 1.18% year-on-year, still within the central bank's target range of 0.5% to 3%.
The Commerce Ministry has maintained this year's inflation target at between 0.6% and 1.3% but plans to revise the estimate soon due to the slower-than-expected economic recovery, weak baht and low oil prices.
"We insist Thailand has yet to enter actual deflation since people are still spending," Mr Somkiat said.
According to the latest survey by the University of the Thai Chamber of Commerce (UTCC), consumer confidence plunged to a 13-month low in June, dampened by weak economic prospects, tepid exports, low farm prices and the drought.
The consumer confidence index fell for a sixth straight month in June to 74.4 points, down from 75.6 in May, 76.6 in April, 77.7 in March, 79.1 in February, 80.4 in January and 81.1 last December.
The June reading was the lowest since May 2014, when confidence began rising on hopes of an economic rebound after the coup ended months of unrest.
Thailand has fully entered "technical deflation" in which prices of goods and services fall for six months in a row as people spend less, leading manufacturers to cut prices.
Thanavath Phonvichai, the UTCC's vice-president for research, said the continued fall of prices reflected meagre spending power, which might eventually affect investment confidence.
He called on the government to launch a new economic stimulus package.