INFLATION slowed to 2.1 percent in March, down from February's 10-month high of 3.2 percent, largely due to lower food prices after the Chinese New Year, the National Bureau of Statistics said yesterday.

Food costs, which account for nearly a third of the Consumer Price Index basket, were 2.7 percent higher than in March last year, compared to the previous month's 6 percent jump.

But the price of vegetables was down 10.3 percent while pork was 5.5 percent cheaper, the bureau's data showed.

Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said the CPI moderation was more than the 2.5 percent that had been expected.

"The much lower than expected inflation figures suggest that the People's Bank of China's tightening bias will probably be eased off in the next two to three months," Zhou said.

"However, the central bank will likely maintain a prudent policy stance if capital inflows are strong and property prices are rising at a fast pace."

Another source of worry was the current bird flu crisis, according to Nomura economist Rob Subbaraman.

"The economy is vulnerable to an epidemic when people shun public places and cut back on trade, travel and other services," Subbaraman said. "But so far, H7N9 avian flu in China has not developed an ability to transmit from human to human."

In the first quarter, China's inflation rose 2.4 percent, below the government's target for 2013 of 3.5 percent.

The Producer Price Index, the factory-gate measurement of inflation, fell 1.9 percent year on year in March, deepening from the cut of 1.6 percent in February.

Lian Ping, chief economist at Bank of Communications, said China currently had to manage three things well - bird flu, the property market and people's confidence - to sustain its economic growth.

A recent survey by the bank showed that Chinese households were less confident about the domestic economy last month, with their interest in buying real estate falling to almost zero amid a new round of restrictive housing policies.

The China Wealth Index, compiled by the bank to gauge sentiment among 1,910 Chinese households in major cities, fell to 125 in March from January's 129, the first retreat in at least half a year.

People's willingness to purchase properties lost 11 points to 100, indicating no intention to conduct deals at present.

But China's economic growth is still expected to accelerate to above 8 percent in the first three months, up from the 7.9 percent in the fourth quarter of last year, analyst said.

Official figures are due for release next Monday.