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MADRID, Feb 27 (Reuters) - Spanish annual inflation fell to 0.7 percent in February, its lowest level since June 1969 as the recession saps demand for goods, preliminary European-harmonised data showed on Friday.
The result announced by the National Statistics Institute was lower than analysts' expectations in a Reuters survey, which had predicted inflation to hold steady at the 0.8 percent level recorded in January.
The Spanish data will reinforce expectations of a fall in inflation across the euro zone, where data due on Monday is expected to show a reduction to 1.0 percent from an estimated 1.1 percent in January.
Some analysts believe recessionary forces will drag Spain into a period of falling prices, something which the government says will be avoided.
"Now the key thing is to find out what underlying inflation was, as that's going to tell us if this reduction in the rate of growth in prices is going to lead to a process of deflation. The rate is going to continue falling over the next few months until it reaches negative levels," said Nicolas Lopez of M&G Valores.
Spanish inflation has fallen every month since last July, when it hit 5.3 percent, which was a record high for the European-harmonised series which began in 1997.
Full, revised inflation data will be announced on March 12. (Reporting by Jason Webb; Additional reporting by Manuel Maria Ruiz and Ben Harding)