Mainland consumer prices up 4.9pc, a 14-month low, but experts cautious Consumer price inflation on the mainland unexpectedly fell to a 14-month low as food became more affordable, giving Beijing more leeway to boost economic growth and fight a global slowdown. The politically sensitive consumer price index rose 4.9 per cent in August over the same month last year, the National Bureau of Statistics said yesterday. That was down from July's 6.3 per cent increase and well below February's 8.7 per cent rate, when inflation peaked at a 12-year high. However, in an ominous sign for the nation's struggling manufacturers, factory gate prices were up 10.1 per cent year on year last month, an increase on the 10 per cent seen in July. The widening gap between factory gate and consumer inflation underlines that while price controls are sheltering consumers, manufacturers are feeling the brunt of rising raw material and energy costs. The news on consumer inflation was well received by the financial markets, with stocks in Shanghai and Shenzhen recouping early losses to close slightly higher. Policymakers have since last year made fighting inflation their priority. But with inflation now off its peak and growth slowing abruptly as US financial woes spread, officials are shifting to a policy of maintaining growth. GDP growth slowed to 10.4 per cent year on year in the first six months of this year, compared with 11.9 per cent for the whole of 2007. Yao Jinyuan, the bureau's chief economist, attributed last month's dip in inflation largely to measures to boost food production and reduce prices. 'The continuing decline in the CPI is a positive sign, as it shows that the government's measures to ease inflationary pressures have been effective,' Mr Yao was quoted by Xinhua as saying. Food prices, which account for more than a third of the CPI calculation, were up 10.3 per cent in August, a drop from the 14.4 per cent seen in July. Non-food prices were up 2.1 per cent in August, the same as in July. Economists said the moderation in consumer price inflation might give policymakers more time to assess the balance of risks between inflation and an economic slowdown. But they warned that it may be too early for the government to relax its tight monetary stance substantially, especially with commodity and energy prices remaining high. Yu Yongding, a leading economist and former member of the monetary policy committee of the People's Bank of China, said the government should not relax monetary policy since inflation could rebound. Mr Yu said a stimulus package was not needed now as the economy was still growing at an annual pace of more than 10 per cent and employment remained strong. 'If we loosen macroeconomic policies too soon, inflation may rebound. That will eventually force China to put a sudden brake on economic growth, which will result in heavier losses,' he was quoted by the official China Securities Journal as saying. Qu Hongbin, chief China economist at HSBC, said it was still too early for the government to meaningfully ease monetary policy. Mr Qu said the risk of the economy slowing too sharply was limited. The government recently raised banks' lending quotas by 5 per cent and many economists forecast Beijing would roll out a package of tax cuts and extra spending on public works if growth slowed too much.