The consumer price index (CPI) in January rose only 1 percent year-on-year, the lowest in 30 months, and the other measure of inflation, the producer price index (PPI), dropped 3.3 percent.

That prompted economists to say the economy may have bottomed out and could start growing again within a few months.

The National Bureau of Statistics (NBS) released the figures on Tuesday.

Inflation was a major concern at the beginning of last year. But the tightening of the monetary policy at the end of 2007 caused the CPI to start falling in May after it peaked at 8.7 percent in February last year. It fell to 1.2 percent in December, the lowest since July 2006.

The PPI dropped 1.1 percent in December after rising 2 percent in November and hitting a 12-year-high of 10.1 percent in August. The PPI's 3.3 percent decline was the steepest in eight years.

Continuous massive loans from the State banks are likely to keep the CPI above zero in 2009, said Shan Weijian, Bank of Communications analyst. The PPI, however, could show a negative growth.

Earlier this month, Premier Wen Jiabao said at the World Economic Forum in Davos that there were already signs of an economic recovery. Banks lent out 900 billion yuan (US$131 billion) in the first 20 days of January, compared with 700 billion yuan in the same period in December and 400 billion yuan in November.

The spending spree during Spring Festival pushed up food prices by 4.2 percent in January. But non-food products' prices, which comprise about two-thirds of the CPI basket, fell 0.6 percent year-on-year.

"Both indicators show signs of deflation," Shan said. Food prices, a key contributor to CPI fluctuation, are not likely to increase substantially this year despite the worst drought in half a century, he added.