Sharjah24 - AFP: Consumer inflation in China increased slightly in December, according to official data released on Thursday, but it still stayed below two percent, a reminder that the economy is still dealing with the aftereffects of years of zero-Covid.

The consumer price index -- the main gauge of inflation -- hit 1.8 percent on-year, up from 1.6 percent in November, the National Bureau of Statistics (NBS) said.

Inflation for the whole of 2022 rose by an average of two percent, making China an outlier compared with other major economies where prices have soared on the back of a spike in energy and food costs, and supply chain snarls.

Beijing had targeted an average inflation rate of three percent for 2022, and the lower figure will give authorities room to provide much-needed stimulus to the economy.

But the world's second largest economy is still reeling from the effects of years of its zero-Covid policy, which hammered businesses and supply chains and dampened consumption, though many restrictions have now been lifted.

The producer price index, which measures the cost of goods leaving factories, contracted in December for the third consecutive month.

The 0.7 percent shrinkage is a further sign of weak demand and reduced margins for businesses.

"The economy is still running below potential," Zhiwei Zhang of Pinpoint Asset Management wrote in a note.

"High-frequency indicators such as traffic flows picked up recently, but demand is still not strong enough to lead to inflationary pressure. Inflation is not a constraint for monetary policy to loosen further this year."

China has been relatively unaffected by a global surge in food prices since Russia's invasion of Ukraine in February.

But officials are keeping a close eye on pork, widely consumed in China, to avoid popular discontent.

While food prices in general rose a moderate 2.6 percent on-year in December, pork surged 22 percent.

China began lifting most of its zero-Covid measures at the beginning of last month.

Despite the end of the restrictions, economic activity has struggled to recover as the virus has spread rapidly across the country, hitting economic activity.

China will unveil its 2022 growth figures on Tuesday.

Beijing has set an annual economic growth target of about 5.5 percent, but many observers think the country will struggle to hit that, despite announcing a better-than-expected 3.9 percent expansion in the third quarter.