China's economy lost steam in November as inflation and output slowed sharply, data showed Friday, fuelling pressure on Beijing to further relax credit restrictions to prevent a hard landing.

Consumer prices rose at their weakest pace in more than a year in November and industrial output growth hit its lowest level in more than two years, the National Bureau of Statistics said in a statement.

Analysts said the weaker-than-expected data will raise concerns that turmoil in Europe and the United States is hurting China's export-driven economy and likely embolden policymakers to further open credit valves to spur activity.

"Inflation is marching south at an aggressive pace, with the producer price inflation virtually collapsing," said Alistair Thornton, an analyst at IHS Global Insight.

"As such, there is likely to be a growing consensus at senior levels regarding the continued lowering of reserve ratio requirements (RRR)."

But the official Xinhua news agency said China's top leaders had decided at a meeting Friday to maintain a "prudent monetary policy" in 2012.

The country's consumer price index, a key gauge of inflation, rose 4.2 percent year-on-year in November, the NBS said.

The rate was well below the 5.5 percent recorded in October, but still slightly above the government's annual target of four percent.

It was the slowest pace since September 2010, when inflation stood at 3.6 percent, and below analyst expectations for 4.4 percent.

But Thornton warned that the figure was distorted by a spike in inflation in November 2010, meaning it was "too early for China to claim complete victory over inflation".

The producer price index, which measures the cost of goods at the farm and factory gate, rose 2.7 percent year on year in November compared with 5.0 percent in October, the data showed.

It was the slowest pace since December 2009 when it rose 1.7 percent.

Output from China's millions of factories and workshops rose 12.4 percent year on year in November, compared with 13.2 percent in the previous month -- the worst performance since August 2009 when it rose 12.3 percent.

Investors reacted negatively to the data, with Chinese shares closing down 14.55 points, or 0.62 percent, at 2,315.27.

Jing Ulrich, an economist at JP Morgan, said the government will have "greater leeway to carry out selective policy loosening".

Beijing last week cut the RRR, the amount of money banks must hold in reserve, for the first time in three years to spur lending and counter turmoil in Europe and the United States that threatens to derail the world's second-largest economy.

China has seen demand for its products shrink in recent months as consumers from Paris to New York cut back on spending due to the increasingly bleak economic outlook.

Manufacturing activity contracted in November for the first time in 33 months, fuelling concerns the economy was at risk of a hard landing.

Until recently, policymakers have been reluctant to relax tight credit restrictions implemented in the past two years for fear of reigniting inflation, which peaked at a more than three-year high of 6.5 percent in July.

But analysts said last week's surprise move to cut banks' RRR showed Beijing was now more worried about economic growth.

Vice Premier Wang Qishan, China's top finance official, last month issued a dire warning that the global recession was here to stay and would impact the export-driven economy due to weakening external demand.

China's economy is expected to grow 8.9 percent next year, which would be the slowest pace in more than a decade, the Chinese Academy of Social Sciences, a state-run think tank, said this week.

Other data released by the NBS on Friday showed fixed asset investment in Chinese urban areas rose 24.5 percent in the first 11 months of the year compared with the same period in 2010.

The growth rate was slightly slower than the 24.9 percent recorded in the first 10 months of the year.

Retail sales rose 17.3 percent year on year in November, a tad up from the 17.2 percent in the previous month.

The figures were released ahead of the annual Central Economic Work Conference, a three-day meeting of top leaders to outline economic strategies for the coming 12 months, which state media said would start Monday.

It will be the last scheduled economic policy gathering ahead of major leadership changes slated for late 2012.