China's inflation rate eased for the third consecutive month in July, giving the government more leeway to pursue policies to boost growth, economists said Tuesday.

Growth in the consumer price index was 6.3 percent in July, down from June's 7.1 percent and May's 7.7 percent, the National Bureau of Statistics said in its monthly release.

"Both inflation and economic activity in general have eased, which provide a better macroeconomic environment for a loosening of policies," said Wang Qing, a Hong Kong-based economist with Morgan Stanley.

He told AFP the government might loosen credit curbs and relax price controls, especially on energy prices, in order to stimulate the economy.

That would represent a big change from spring, when the inflation rate lingered at near 12-year highs, risking an erosion of purchasing power for ordinary people.

Inflation remains a problem, but controlling it may no longer be an all-consuming top priority for the government given the economy is slowing, experts said.

The Chinese economy, the world's fourth-largest, grew 10.4 percent in the first half of the year, lower than the 11.9 percent recorded for all of 2007.

Premier Wen Jiabao last month called for an emphasis on growth, saying "the country should make efforts to secure steady and comparatively fast economic growth."

He said that was a task "not only for this year but also for the next few years."

Rapid increases in the price of food items had boosted inflation earlier in the year, but non-food items are gradually having a bigger impact, the data showed.

Non-food prices rose 2.1 percent in July, up from 1.9 percent in June and 1.7 percent in May, according to the bureau.

"The decline (in consumer price inflation) was mainly driven by falling food price inflation … as food supply increased," said Lehman Brothers economist Sun Mingchun, based in Hong Kong.

"In our view, inflation should decline further over the rest of the year."

The consumer price data was released a day after the government said producer prices had risen 10.0 percent in July, the fastest rate in 12 years.

"Producer price figures showed costs pressures remained quite big while consumer price figures showed price rises on the consumption side have eased," said Tao Dong, a Hong Kong-based economist with Credit Suisse.

"The result is that producers' margin is probably squeezed," he said.

Rising fuel prices played a role in last month's inflation, with petrol prices up 22.2 percent from a year earlier, according to the statistics bureau.

Beijing in June lifted petrol and diesel prices by up to 18 percent as the government moved to close the gap between state-set domestic prices and the soaring world oil market. The government also raised electricity costs.

Sun with Lehman Brothers expected another round of energy price hikes before the end of the year, but said inflation was forecast to ease and reach 6.8 percent for the full year.

Inflation in the cities in July was 6.1 percent, while in the countryside it stood at 6.8 percent, according to the bureau.

Prices are rising faster in the countryside partly as a result of recent policy measures aimed at lifting the economy in China's vast rural interior.

In the first seven months of the year, China's consumer price index was up 7.7 percent from the same period in 2007, the bureau said.