China's consumer inflation eased in August while wholesale deflation intensified, clouding the outlook for an economy struggling to stage a convincing recovery.
China's consumer prices eased to 2 percent last month, data on Thursday showed, slower than July's 2.3 percent rise and below a Reuters poll expecting a 2.2 percent increase. This remains below Beijing's official target of 3.5 percent.
Producer prices, meanwhile, continued their deflationary spiral, dipping 1.2 percent after falling 0.9 percent in July, a tad worse than the 1.1 percent fall expected. Producer prices in China have been declining since February 2012, weighed by falling commodity prices, overcapacity and weakening demand.
"I think the figures are consistent with a whole lot of data showing that the Chinese economy losing momentum again," said Rob Subbaraman, chief economist at Nomura.
"The PPI deflation is worsening, I think that's a sign of overcapacity problems. The oversupply problem in the property sector is starting to have effects on the upstream industries that supply the property sector. They're feeling the pinch now so that's showing in the PPI," he added.
China's economy growth slowed to 7.4 percent in the first quarter from a year earlier, the slowest pace in six quarters. Growth inched higher to 7.5 percent the second quarter, but a flurry of recent data has painted a bleak picture in credit inflows, manufacturing and the real estate market.