A moderate CPI and deflationary PPI leaves room for more growth in the remainder of 2013

Moderate consumer inflation and narrower producer price deflation in August sent out positive signals indicating the steady growth of the Chinese economy and cheering up investors amid the implementation of supportive measures by the government.

The benign inflation figures are expected to provide more space for policy-makers to take macroeconomic adjustment steps in response to any sudden headwinds from the external environment and concentrate on structural reforms, analysts said.

China's Consumer Price Index in August was up 2.6 percent year-on-year, compared with the 2.7 percent annual increase seen in July, the National Bureau of Statistics said on Monday.

Food prices, which increased 4.7 percent year-on-year in August, contributed 1.54 percentage points to the overall inflation figures, and were down from the 5 percent annual growth seen in July, while non-food price growth was 1.5 percent in August, slower than the 1.6 percent in July, the statistics bureau said.

Pork prices rose 6 percent year-on-year in August, compared with the 3 percent increase in July, vegetable prices rose 5.2 percent from a year earlier, down from July's 11.8 percent rise, and fruit prices rose 7.5 percent compared with 7.3 percent in the previous month.

Meanwhile, the country's Producer Price Index has dropped for 18 consecutive months, but PPI deflation continued to narrow down in August.

The PPI dropped 1.6 percent from a year earlier, compared with a 2.3 percent decrease in July, while it increased 0.1 percent from July, indicating a positive tone for the industrial production sector and the whole economy.

"Inflation is not a priority policy consideration this year," said Zhu Haibin, chief economist in China at JPMorgan Chase & Co.