China’s consumer inflation eased to a four-month low in August while factory-gate prices extended their decline to 30 months, adding room for government stimulus to support the economy amid a property slump.

The consumer price index rose 2 percent from a year earlier, the National Bureau of Statistics said in Beijing today, compared with the 2.2 percent median estimate in a Bloomberg News survey and 2.3 percent in July. The producer price index fell 1.2 percent, compared with projections for a 1.1 percent drop.

Today’s data add to signs of weakness in domestic demand after figures this week showed declining imports and a slowdown in money-supply expansion, bolstering the case for additional measures to support the economy. Premier Li Keqiang reiterated yesterday that China won’t have a hard landing and has confidence in achieving key development goals for 2014, with a growth target of about 7.5 percent.

“Today’s data prove a fact we all know: The economy is still weak,” said Wang Tao, head of China economic research at UBS AG in Hong Kong. “The government has been rolling out measures to stabilize growth. This situation will definitely continue.”

Analysts’ estimates for August consumer inflation ranged from 2 percent to 2.7 percent, and the government has a target for the year of about 3.5 percent. Projections for producer prices ranged from a 0.6 percent decline to a 1.3 percent drop, following a 0.9 percent fall the previous month.

Industrial Outlook

The PPI’s 30th straight drop extended the longest streak since 1997-1999. The statistics bureau said in an analysis that the outlook for industrial demand isn’t optimistic and some industries still face price pressures due to overcapacity.

“This deflationary environment is very grave,” Shen Jianguang, chief Asia economist at Mizuho Asia Securities Ltd. in Hong Kong, wrote in an e-mail. August inflation indicates “ample room for further easing, and the government will be more proactively involved in policy easing going forward,” with the next measures likely to target mortgages, Shen said.

The decline in August PPI resulted from drops in prices of oil as well as coal, steel and cement, the statistics bureau said.

Not all consumer prices were subdued. The bureau said household services prices rose 8.8 percent from a year earlier and preschool education costs increased 5.8 percent. The average price of bananas jumped 40 percent, apples rose 33 percent and eggs were 23 percent higher, according to the government.

’Strong Stimulus’

Prices for labor-intensive services such as tailoring and home repairs are rising at a faster pace than other consumer items, Bill Adams, senior international economist for PNC Financial Services Group, said in an e-mail.

“There’s already a lot of money in the pool, and we can’t rely on monetary stimulus to spur economic growth,” Premier Li Keqiang said Sept. 9, according to a Xinhua News Agency transcript of comments to business executives attending the World Economic Forum event in Tianjin.

“We do not want to rely on ’strong stimulus’ to push forward economic development, but rely on ’strong reform’ to invigorate the market,” Li said. He reiterated that growth can be slightly above or below the goal of about 7.5 percent.

Manufacturing (CPMINDX) expansion slowed in August, according to two gauges released respectively by the government and HSBC Holdings Plc. Imports unexpectedly dropped 2.4 percent in August from a year earlier, customs data showed, suggesting domestic demand remains subdued.

Bloomberg