China's consumer prices returned to positive territory in August while factory-gate price declines slowed, data showed on Saturday, as deflation pressures ease amid signs of stabilisation in the economy.

But analysts say more policy support is needed to shore up consumer demand in the world's second-biggest economy, with a labour market recovery slowing and household income expectations uncertain.

The consumer price index (CPI) rose 0.1 percent in August from a year earlier, the National Bureau of Statistics said, slower than the median estimate for a 0.2 percent increase in a Reuters poll. CPI fell 0.3 percent in July.

Core inflation, which excludes food and fuel prices, was unchanged at 0.8 percent in August.

The producer price index (PPI) fell 3.0 percent from a year earlier, in line with expectations, after a drop of 4.4 percent in July. The drop in factory prices was the smallest in five months.

"There is a bit of improvement in the inflation profile. In the meantime, the PPI deflation appears to be narrowing, pointing to a slow and moderate restoring process," said Zhou Hao, chief economist at Guotai Junan International.

"In general, the inflation (rate) still points to weak demand and requires more policy support for the foreseeable future."

Food prices fell 1.7 percent on year while non-food costs rose 0.5 percent - led by rising costs linked to tourism, the bureau said.

Recent floods have damaged corn and rice crops in China's key northern grain-producing belt, sparking domestic food inflation fears as consumers worldwide face tightening food supplies caused by the war in Ukraine.

"Both CPI and PPI are likely to show modest improvements in the fourth quarter," said Luo Yunfeng, an economist at Huajin Securities.

Compared with the previous month, CPI rose 0.3 percent, picking up from 0.2 percent in July, the statistics bureau said.

Pork prices rose 11.4 percent month-on-month, versus no change in July, due to the impact of extreme weather in some areas. They were down 17.9 percent from a year earlier, narrowing from a 26 percent drop on July.

Factory-gate deflation moderated in August due to improving demand for some industrial products and rising international crude oil prices, the statistics bureau said.

China's anaemic price changes contrast sharply with the surging inflation most other major economies have seen since the Covid-19 pandemic waned, forcing their central banks to rapidly raise interest rates.

China in July became the first of the Group of 20 wealthy nations to report a year-on-year decline in consumer prices since Japan's last negative headline CPI reading in August 2021.

August trade data showed China's exports and imports both narrowing their declines, joining a run of other indicators showing a possible stabilisation in the economic downturn, as policymakers seek to spur demand and fend off deflation.

"With early signs of growth stabilisation, we see deflationary pressures easing, a trend reflected in higher commodity prices in August," ANZ analysts said in a note.

Beijing has announced a series of measures in recent months to shore up growth, including mortgage rate cuts and the easing of borrowing rules last week by the authorities to aid homebuyers.

China's central bank could continue to cut interest rates and bank reserve requirement ratios, said Bruce Pang, chief economist at Jones Lang Lasalle.

Premier Li Qiang said this week that China is expected to achieve its 2023 growth target of around 5 percent, but some analysts believe the target could be missed due to a worsening property slump, weak consumer spending and tumbling credit growth.