Producer prices meanwhile slipped 0.8 percent on-year, better than Reuters' forecasted 0.9 percent fall and significantly narrowing from July's 1.7 percent drop. Higher commodity prices were believed to be the catalyst for the monthly improvement.
Fading producer price deflation points to stronger Chinese nominal growth, noted Shane Oliver, head of investment strategy and chief economist at AMP Capital.
Despite the slowdown in CPI, economists were still optimistic.
"The overall picture for China is still quite positive," Hao Zhu, senior emerging markets economist Asia at Commerzbank, told CNBC's "Squawk Box."
"Narrowing producer price deflation suggests corporate earnings will be improving in the coming months. While CPI is still soft, it at least gives the government and the central bank more room to ease."