China's consumer price index (CPI), a main gauge of inflation, dipped 1.8 percent in July from a year earlier, the National Bureau of Statistics (NBS) announced Tuesday.

This marked the sixth consecutive month of decline since the index dropped 1.6 percent in February, the first fall since October 2002.

The index was unchanged compared with June, according to the NBS, and consumer prices for the first seven months fell 1.2 percent from the same period last year.

The producer price index (PPI), which measures inflation at the wholesale level, fell 8.2 percent year on year in July, according to the NBS. It showed a month-on-month increase of 1 percent.

The July decline compared with a 7.8-percent drop in June and 7.2-percent drop in May year on year.

The fall in both CPI and PPI was in line with market expectations, said Zuo Xiaolei, an economist with China Galaxy Securities.

There were still downward pressure for the two indices as the economy was still on track to recovery and prices increased fast in July last year, causing a high base effect, she said.

She expected the two indices to begin increasing in the fourth quarter, in October or November, as the economy stabilizes and the base effect gradually taperes off.

The government set an annual target of 4 percent for the CPI increase in 2009 at the beginning of this year.

To stimulate economic growth, lenders pumped 7.73 trillion yuan (1.13 trillion U.S. dollars) of new loans into the economy in the first seven months, according to the People's Bank of China, the central bank, Tuesday.

The surge in credit would help boost demand, which would push up prices, said Zhu Jianfang, chief economist at Citic Securities.

Food prices, which account for about one-third of the CPI, fell 1.2 percent year on year in the January-July period.

Purchasing prices of raw materials, fuel and energy fell 9.2 percent year on year in the first seven months.

(Xinhua News Agency August 11, 2009)