Updated: 05/09/2014 11:11 | By Agence France-Presse

China deflation fears rise as April inflation tumbles

China's annual inflation fell sharply in April to its lowest level in 18 months, official data showed Friday, raising concerns about the risk of deflation in the world's second-largest economy.

China deflation fears rise as April inflation tumbles

A customer picks vegetables in a market in Hangzhou, east China's Zhejiang province on April 11, 2014

The consumer price index -- a main gauge of inflation -- went up by 1.8 percent year-on-year last month, the National Bureau of Statistics (NBS) said in a statement, down from a rise of 2.4 percent in March.

It was the lowest since October 2012, when the statistic stood at 1.7 percent.

The April figure was also well below the 3.5 percent annual inflation target set by Beijing and added to analyst worries that deflation could be looming as Chinese growth slows.

Moderate inflation can be a boon to consumption as it encourages consumers to buy before prices go up, but economists say falling prices encourage consumers to put off spending and companies to delay investment, both of which act as brakes on growth.

The producer price index (PPI) -- a measure of costs for goods at the factory gate -- fell by 2.0 percent year-on-year in April, the NBS said in a separate statement, its 26th month of deflation, albeit less steep than its a 2.3-percent decline in March.

"As the PPI inflation remained negative for more than two years and the PPI is an important leading indicator for CPI, the risk of deflation is looming large on the horizon," ANZ economists Liu Ligang and Zhou Hao said in a research note.

The NBS said China's CPI increased by 2.2 percent in the first four months of the year from the same period in 2013.

Last month's price increase was mainly driven by food costs, particularly an 18.6-percent jump in fruit prices, according to the statement.

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