SHANGHAI — China's consumer prices moderated in August, helped by slower increases for food, possibly giving the government scope to hold off on further tightening of monetary policies as it confronts a slowing global economy. Consumer prices in the world's second-largest economy rose 6.2 percent over a year earlier, cooling from a 37-month high of 6.5 percent in July, the National Statistics Bureau said Friday. Inflation is still above the government's 4 percent target for the year but the latest figures suggest that repeated interest rate hikes and other curbs meant to chill the overheated economy are taking hold. That could allow China's leaders greater leeway for policies aimed at keeping economic growth on track, as the U.S. and European outlook worsens. Less pressure from inflation "would remove a significant barrier to further policy stimulus in the event of a slump in global demand," said Mark Williams, of Capital Economics, in a report. Food prices, which comprise a large share of the consumer price index, climbed 13.4 percent, down from 14.8 percent in July. A 29.3 percent surge in prices for meat and poultry and 12.2 percent increase for staple grains kept food price increases relatively strong. "China's inflation is down, but not out," said Alistair Thornton, an economist for IHS Global Insight. "The moderation in inflation is not broad based," he said, attributing it mainly to slower increases in pork prices, which still jumped 45.5 percent from a year earlier. Thornton said that non-food inflation actually increased to 3 percent. Among the highest increases was a 14.9 percent climb in costs for diesel and gas. While visiting China earlier this week, World Bank President Robert Zoellick cautioned that inflation remains the country's key policy concern, echoing similar statements by Premier Wen Jiabao. Surging prices also complicate Beijing's efforts to promote retail spending and other domestic consumption and reduce reliance on exports and investment. Spending on new factories and other investments has accounted for more than 40 percent of China's output over the past decade — several times that of the United States, Japan and other major economies. The U.S. and major European economies look likely to stagnate or go into reverse, the Organization for Economic Cooperation and Development said Thursday, slashing its growth forecasts for much of the developed world. The fragility of major export markets could prod China into easing credit to keep demand at home steady, despite Wen's insistence that a formal change in policy will only happen once inflation has fallen significantly, said Williams. "Nonetheless, we would not be surprised if controls on credit growth were quietly eased much sooner, particularly if the global outlook worsens," he said in a report issued before Friday's figures were released.
