China says inflation slows to 2.0% in January

Inflation in China slowed to 2.0 percent in January, the National Bureau of Statistics said Friday, easing from a seven-month peak of 2.5 percent in December.

But month on month the consumer price index (CPI) -- a main gauge of inflation -- rose 1.0 percent, its highest increase in a year, it said, as prices jumped in the lead-up to Sunday's Lunar New Year.

Producer prices, which measure the cost of goods as they leave factories, declined 1.6 percent year-on-year, contracting for the 11th straight month but at a slower rate than the 1.9 percent fall in December, the data showed.

Analysts said the mild inflation figures, in line with expectations, were skewed by a shifting of the new year to Sunday from January in 2012, which delayed holiday shopping spending sprees.

"Likewise, February will likely see a spike of CPI," Sun Junwei, an HSBC economist in Hong Kong, said in a research note.

She expected the inflation rebound to be manageable as the recovery in the world's second-largest economy remained modest.

China's economy expanded 7.8 percent last year, its lowest annual figure since 1999, in the face of weakness at home and in key overseas markets.

But it grew 7.9 percent in the final three months of 2012 from a year earlier as industrial output and retail sales strengthened, snapping seven straight quarters of slowing growth.

Manufacturing activity in China continued to gain traction in January, with the purchasing managers' index -- a widely watched barometer of the health of the economy -- hitting a two-year high of 52.3, according to a survey by British bank HSBC.