Mainland inflation cooled more than expected last month to its lowest level in nearly 21/2 years, reflecting weak demand and pointing to more policy easing in the months ahead.
The consumer price index (CPI) rose 2.2 per cent in June from a year earlier, the slowest pace since early 2010, and down from a 3 per cent rise in May, according to the National Bureau of Statistics.
The producer price index (PPI), a gauge of factory prices, dropped for the fourth consecutive month by 2.1 per cent in June from a year earlier, fanning worries that deflation may have taken hold in the world's second-largest economy.
'Inflation is unlikely to rebound in the short term,' clearing the way for the government to ease policy, said Peng Wensheng, an economist at China International Capital Corp.
While moderating prices is good news for social stability, policymakers must now focus on economic growth and maintaining employment ahead of a once-in-a decade-leadership change set for autumn.
'The Chinese government will not ignore growth risks in this critical year of leadership transition,' Barclays economists said.
