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CPI increases at slowest pace in 30 months

THE Consumer Price Index increased 1 percent in January from a year earlier, the slowest pace in 30 months, while producer prices extended declines due to the global financial crisis.

The Consumer Price Index, the main gauge of inflation, slowed from 1.2 percent in December, representing the ninth straight monthly decline and the weakest gain since July 2006, according to the National Bureau of Statistics.

Food prices, a major driver of inflation, advanced 4.2 percent last month even though pork prices dropped 13.3 percent. The non-food sector dipped 0.6 percent last month.

The CPI in rural areas rose 1.5 percent in the period while inflation in urban areas expanded 0.7 percent, the bureau said.

"There is a considerable chance that a negative figure will be reported in February," said Sherman Chan, an economist at Moody's

China was hit by snowstorms in January 2008, which stimulated demand and tightened supply in February. It generated a decade-high 8.7 percent growth in inflation that month.

Economists have said that lower inflation leaves the central bank with more room to cut interest rates to shore up a slowing economy.

"Amid some encouraging signs in recent weeks, which include a surge in lending during January, the urge for further interest rate cuts is not as strong as it has been," Chan said.

The threat of inflation concerned Chinese authorities in the first half of 2008. However, inflation dropped in the second half as global financial markets were routed and international commodity prices corrected.

The People's Bank of China has cut the interest rate five times since September. The key one-year lending rate now stands at 5.31 percent.

The Producer Price Index, the chief yardstick of factory-gate inflation, dropped 3.3 percent last month from a year earlier led by declining raw material and fuel prices.

The PPI extended a 1.1-percent drop in December and last months figure represented the steepest decline in almost seven years.

The global economic downturn triggered sharp declines in commodity prices such as oil and ore, the bureau said.


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