Inflation in China eased for a fourth straight month to reach a 30-month low in July, paving way for the policymakers to go ahead with stimulus measures to counter a slowdown in economic growth.
The rate of inflation fell to 1.8 percent in July from 2.2 percent in June, the National Bureau of Statistics said Thursday. Economists expected a fall to 1.7 percent.
The main components that contributed to the decline were food and fuel. Food inflation eased again with prices rising just 2.4 percent year-on-year compared to 3.8 percent increase in June.
Among food, prices of pork, a main component in China's consumer price basket, tumbled 18.7 percent from last year. The government has decided to purchase frozen pork again to deal with falling prices, the National Development and Reform Commission said in a statement on Monday.
Reflecting a continued decline in fuel costs, the price index for transport and communication component fell 0.9 percent year-on-year. Prices of vehicle fuel and spare parts dropped at a faster pace of 4.4 percent.
In July, China announced a third cut in fuel prices in just two months due to falling international crude prices. Prices were reduced by about 5 percent and was mainly aimed at boosting domestic oil consumption.
Non-food pries increased at a slightly faster pace of 1.5 percent. Housing costs increased 2.1 percent in July, while utility costs were up 2.5 percent.
Meanwhile, producer prices declined for a fifth consecutive month, falling 2.9 percent year-on-year in July. This compares to forecasts for a 2.5 percent drop and follows a 2.1 percent decline in the previous month.
Subdued inflation gives room for the policy makers to ease monetary policy to support the economy. The People's Bank of China reduced the interest rates twice this year to counter a slowdown in economic growth.
The central bank has reduced the reserve requirement ratio for commercial lenders three times since November last year.
The economy grew 7.6 percent in the second quarter, the weakest pace since the first quarter of 2009. The International Monetary Fund expects China's economic growth to moderate to around 8 percent this year.
IMF forecasts inflation to stay around 3-3.5 percent this year and fall to 2.5-3 percent in 2013, barring further shocks to agricultural supply.
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