Beijing - China on Tuesday reported a slight drop in monthly inflation to 6.3 per cent year-on-year in July, but prices of some food items soared.

The rise of 6.3 per cent in July in the consumer price index (CPI) was down from 7.1 per cent in June, and from a 12-year high of 8.7 per cent in February.

It brought average inflation for the first seven months of the year down to 7.7 per cent, the National Bureau of Statistics said.

"The continuous decline of the CPI is a positive sign as it shows the government's measures to ease inflationary pressures were effective," Zhang Xiaojing, an analyst with the Chinese Academy of Social Sciences, told the official Xinhua news agency.

Falling food prices and lower demand because of an economic slowdown were the main causes, Zhang was quoted as saying.

Inflation in poor rural areas continued to outstrip urban inflation, rising 6.8 per cent in July compared with 6.1 per cent in urban areas, the bureau said.

Food prices rose 14.4 per cent year-on-year in July, down from about 20 per cent earlier this year, it said.

But meat prices still soared by 16 per cent and cooking oil rose 31 per cent compared with July 2007.

The producer price index for industrial products rose 10 per cent year-on-year in July, the highest since 1996, the bureau reported on Monday.

But the agency quoted government economist Zhang Liqun as saying the increase, which helped spur a big drop in Chinese share prices on Monday, would not immediately put more inflationary pressure on consumer prices.

China recorded estimated economic growth of 10.4 per cent in the first half of the year, compared with 8.6 per cent in the first half of 2007.

The World Bank in June raised its forecast for China's annual economic growth to 9.8 per cent, marginally higher than its previous forecast, citing slowing inflation and limited economic impact from the devastating Sichuan earthquake in May.

In April, China raised its estimated GDP growth for last year to 11.9 per cent, the fastest growth since 1994. (dpa)