China's inflation eased in April to 5.3% and other data, including industrial output and loans, suggested slower activity in the world's second-biggest economy and less room for further aggressive moves to tighten monetary policy.
Inflation was slightly higher than expected but lower than a 32-month high in March of 5.4%, underlining expectations that price pressures were peaking and would start to ease in the second half of 2011.
The annual pace of industrial output and retail sales eased more than expected, backing the view that the heady 10-% plus pace of economic growth last year is calming. Annual food price increases, the main driver of overall inflation, pulled back to 11.2% in April from 11.7% in March.
"Price pressures are still uncomfortably strong, but there are some signs in today's data that policy measures put in place over the last six months or so are having an impact," said Brian Jackson, economist with Royal Bank of Scotland in Hong Kong.
Jackson said inflation remained high enough to warrant two more increases by the central bank in interest rates and further yuan appreciation against the dollar.
But several analysts said other data released on Wednesday, including figures that showed a slowdown in the pace of money supply and bank loans outstanding, suggested that the central bank could be less aggressive with monetary tightening in the months ahead.
"The April economic indicators make it less likely that the central bank will raise required reserve ratios or interest rates. I believe the central bank will, at most, raise reserve requirements once in the coming two months," said Shao Yu, an economist with Hongyuan Securities in Shanghai.
The central bank has raised interest rates four times since last October and banks' reserve requirements seven times, which has meant big banks have a record 20.5% in deposits tied up. Those funds could otherwise become loans.
Markets showed little reaction to the data.
China's industrial output in April rose 13.4% from a year earlier, easing from a pace of 14.8% in March, the National Bureau of Statistics said. Output had been forecast in a Reuters poll to rise by 14.7%.
Retail sales rose 17.1%, lower than 17.6% forecast in a Reuters poll and weakening from 17.4 % in March.
Chinese banks extended 739.6 billion yuan ($113.9 billion) in new yuan loans in April, more than market forecasts for 700 billion yuan, People's Bank of China figures showed.
M2 money supply growth of 15.3% was much lower than forecasts for 16.5% and also marked the lowest pace in 29 months.
Outstanding yuan loans at the end of April were 17.5% higher than a year earlier, also the weakest pace in 29 months, central bank data showed.
Though far too soon for Beijing to declare victory in its battle against inflation, the stabilisation of prices suggested that tighter monetary policy was beginning to produce initial results, analysts said.
The government has a target of 4% annual inflation, but some analysts said it could be tough to achieve that goal given increasing labour costs and rising commodity and fuel prices.