CHINA'S inflation grew at the fastest pace in 21 months and industrial production continued to slow, paving the way for policy fine-tuning to support growth.

Some analysts said the rebounding consumer prices may have become the peak of the year, and the overall economic growth was largely in line with the anticipation of Chinese authorities.

The Consumer Price Index, the main gauge of inflation, rose 3.3 percent from a year earlier last month, the National Bureau of Statistics said today.

It compared with an increase of 2.9 percent in June and 3.1 percent in May. In the first seven months, the inflation index gained 2.7 percent year on year, still below the yearly target of 3 percent set by the central bank.

"The dramatic rebound of the CPI was a natural result of extreme weather, serious drought and floods taking place in recent months," said Li Maoyu, an analyst at the Changjiang Securities Co. "The 3.3-percent expansion may be the highest of the year, and we don't think there will be any interest rate increase in the current quarter."

Food costs, which account for one-third in the basket of the CPI, surged 6.8 percent from a year earlier in July, while non-food sector only advanced 1.6 percent.

The Producer Price Index, the factory-gate measure of inflation, rose 4.8 percent on an annual basis last month. The rate was down 1.6 percentage points from that in June, another harbinger that the slowdown in upstream production costs will spill over to CPI in later months.

Growth of July's industrial output continued to moderate due to stronger government efforts to curb energy-intensive projects. The pace weakened to an annualized 13.4 percent, compare with 13.7 percent in June and 16.5 percent in May.

The urban fixed-asset investment in the first seven months accelerated 24.9 percent year on year to 11.9 trillion yuan (US$1.75 trillion), slower from 25.5 percent in the first half.

Retail sales grew stably, with a rate of 17.9 percent from a year earlier to 1.2 trillion yuan last month, down 0.4 percentage point from that in June.