* Inflation data points to further cooling in economy
* Some economists say more stimulus steps needed
* Aug CPI +2.0 pct yr/yr vs f'cast +2.2 pct
* Aug PPI -1.2 pct yr/yr vs f'cast -1.1 pct
* Aug CPI +0.2 pct from July, vs f'cast +0.4 pct (Adds background, comment)
By Xiaoyi Shao and Pete Sweeney
BEIJING, Sept 11 (Reuters) - China's consumer inflation cooled more than expected in August, further evidence that the economy is losing momentum, but economists are divided over whether Beijing will use the extra room to announce fresh stimulus measures.
The consumer price index (CPI) rose 2.0 percent in August from a year earlier, the National Bureau of Statistics said on Thursday, missing market expectations for 2.2 percent and down from 2.3 percent in July.
The producer price index fell 1.2 percent, its 30th consecutive monthly decline, as weak economic conditions continue to rob Chinese companies of pricing power. The market had expected a 1.1 percent decline after a drop of 0.9 percent in July.
Highlighting faltering demand, China's second-biggest steelmaker, Baoshan Iron and Steel 600019.SS (Baosteel), said on Wednesday it will cut its prices for October delivery, which is normally a peak steel consumption period.
The CPI rose 0.2 percent in August from the previous month, only half as much as economists had expected.
With consumer inflation well below the official annual ceiling of 3.5 percent, the government and the central bank have scope to provide further stimulus to the economy if needed - but the question is whether pumping more money into the system will help the economy or hinder it.
"As China's inflation continues to trend down, we believe that the deflation risk is rising and China needs to further ease monetary policy," said Hao Zhou, economist at ANZ in Hong Kong, reflecting one common view.
"More importantly, the soft PPI inflation indicates that the real interest rates facing the corporates have even picked up amid the economic slowdown, which will likely squeeze their profit margins over time."
But other economists think policymakers will wait and see if stimulus measures announced earlier in the year gain traction.
Bill Adams at PNC argued that low unemployment rates means that Beijing will not need to do much.
"Inflation is well-controlled, and the limited public data on labour market dynamics suggest continued low unemployment," he wrote in a research note, adding that signs of robust inflation in the prices for services such as tailoring and home repair reflect a strong employment rate.
"August data so far in hand - the CPI and PPI reports, PMIs, and trade data - hint that headline real GDP growth is picking up in the third quarter of 2014, and suggest a new round of government stimulus is unlikely in 2014."