Increased food prices drove China's inflation at retail level to rise at a faster pace in March than the previous month, but the inflation pressure still remained subdued and gave policymakers enough room to mull economic policy action.

INFLATION TAME

China's consumer price index (CPI), a main gauge of inflation, increased 2.4 percent year on year in March, up from 2 percent in the February, official data showed on Friday.

The acceleration in inflation was mainly attributed to faster growth of food prices, said Yu Qiumei, a senior statistician with the National Bureau of Statistics (NBS).

Food prices account for nearly one-third of the weighting in the calculation of China's CPI. They gained 4.1 percent from a year earlier and contributed 1.35 percentage points to March's CPI growth, according to NBS figures.

Prices of fruit, aquatic products, vegetables and grain went up year on year in March, with fruit prices surging 17.3 percent and those of vegetables jumping 12.9 percent.

Tang Jianwei, a researcher at the Bank of Communications, attributed the continued monthly CPI growth partly to the so-called carryover effect, as the prices a year earlier remained at a relatively low level.

Bucking the trend, prices of poultry and meat declined in March year on year, with the price of pork, China's staple meat, down 6.7 percent.

Prices of non-food products and services edged up 1.5 percent in March from a year ago, boosted by prices of utilities including electricity and gas, tours and outings, and rent.

However, China's CPI declined 0.5 percent in March from February mainly due to a food price drop, as Chinese people traditionally have bigger demand for vegetables, meat and fruit during the Spring Festival, which started at the end of January and lasted through early February this year.

Tang estimated a full-year CPI growth hovering at 2.6 percent in 2014, as the country's economic growth will continue the moderate pace amid the weak demand both at home and abroad.

The latest NBS data also revealed that China's producer price index (PPI) contracted 2.3 percent year on year in March, following a 2-percent decline in February.

The PPI, which measures inflation at wholesale level, has been in deflationary territory for 25 consecutive months, the longest drop since the 1990s.

The PPI contraction showed that demand for industrial products remained weak, and a risk of deflation was likely to emerge, Liu Ligang, chief China economist at the ANZ Banking Group, said in a research note.