Economists polled by Reuters had expected a 0.3% month fall and a 1.2% year-on-year decline.
The monthly fall was caused mainly by a sharp drop in mail orders and shopping on the internet which fell 4.5% and a drop in the sale of petrol, down 3.0%.
Year-on-year, the sales of fuel was even more pronounced at 7.7% and there was a 3.2% fall in the sales of food drinks and tobacco.
Euro zone inflation was 5.3% in August, well above the European Central Bank's target of 2.0%.
Elsewhere, Europe's bid to expand its green tech industry faces a host of challenges, including high energy costs and supply chain issues, solar industry representatives gathered in Madrid warned on Thursday.
The comments come as the European Commission and European governments weigh tougher action on imports while aiming to boost clean tech manufacturing in Europe and reduce the reliance on China for products needed for the green transition.
"You cannot manufacture in Europe," Gonzalo de la Vina, president for the Europe, Middle East and Africa region of Chinese solar energy firm Trina Solar, said at an event hosted by Spanish industry group Foro Solar.
The company has manufacturing operations in China, Vietnam and Thailand but not in Europe. It plans to invest more than $200 million to build a solar photovoltaic manufacturing facility in Texas, its first in the Western Hemisphere.
"Europe isn't profitable," he added.