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Feb consumer inflation slowed

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Feb producer deflation deepened

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Inflation will not constrain supportive monetary policy

(Adds context on global inflation)

By Liangping Gao and Ryan Woo

BEIJING, March 9 (Reuters) - China's annual consumer inflation slowed to the lowest rate in a year in February as consumers remained cautious despite the abandonment of strong pandemic controls late in 2022.

Combined with persistence of producer deflation, also reported on Thursday, the data showed price pressure had become no obstacle to more government action to support economic recovery from COVID-19 disruption, analysts said.

The consumer price index (CPI) in February was 1.0% higher than a year earlier, rising at the slowest pace since February 2022, said the National Bureau of Statistics (NBS).

The result was well below the median estimate of 1.9% in a Reuters poll and the 2.1% annual rise seen in January.

The government is targeting an average level of consumer prices this year about 3% higher than in 2022.

"For monetary policy, which is focused on consolidating the economic recovery and achieving stable upward momentum, there is no constraint from an inflation rate that is within the policy target," said Bruce Pang, chief economist for greater China at JLL, commenting on the data.

Zhiwei Zhang, president of Pinpoint Asset Management, said the figures conflicted with other data that showed considerable strength in domestic demand.

"Nonetheless, the weak CPI inflation opens room for the government to launch more monetary easing policies," he said.

Economists generally do not expect big monetary policy moves this year, however. The government cut bank reserve requirements twice last year to stimulate the economy.

Whereas other countries are suffering decades-high inflation rates, strenuous efforts at controlling COVID-19 in China last year disrupted production and suppressed demand, keeping price pressure contained. Economists expect inflation to strengthen in coming months, mostly thanks to the end of pandemic controls.

YUAN WEAKENS

The yuan weakened on Thursday as the price data revived investors' doubts about the pace of the recovery, which is facing the challenge of weakening foreign demand and a domestic property downturn.

The parliament has set what analysts say is a conservative growth target for 2023 gross domestic product of around 5%, a sign that policymakers are conscious of economic headwinds.

The NBS attributed the slowing growth in consumer prices to falling demand after the January's Lunar New Year holidays. Most fresh food prices had fallen as a result of warm weather and abundant supply, it said.